How to Make $100,000 Per Year with Fixer-Upper Rental Properties


Some people work so hard to make money in real estate. They flip dozens of homes, deal with hundreds of tenants, and are always trying to put out a fire somewhere.

Sounds exhausting, doesn’t it?

But what if I told you that you that within five years you could be making $100,000 annually from just two real estate transactions per year? Sound too good to be true?

Today I want to teach you about the BRRRR strategy and the power it can have in your real estate investing. I’ll also be walking you through a step by step plan for making $100,000 per year using this powerful investing plan.


(Hey! If you’re interested in the BRRRR strategy – check out this weeks free LIVE webinar: How to Achieve Massive Success Using the “BRRRR”  Strategy 

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What is BRRRR?

BRRRR is an acronymn for a popular investment strategy that, until now, hasn’t been given a name. So, I decided to name it! BRRRR stands for:

  • Buy
  • Rehab
  • Rent
  • Refinance
  • Repeat

In other words, it’s the strategy that involves buying fixer-upper rental properties, repairing them, leasing them out to great tenants, refinancing to get your money back and then repeating the process over again and again. This can be a powerful strategy because of the ability to acquire numerous properties without you running out of capital to invest — and at the same time, combining the benefits of house flipping with the wealth building characteristics of rentals.

Let’s break down the strategy for you and look at each step.

1. Buy

The first step in the process is to buy a great deal. Not just any deal… a GREAT one. Great location, great neighborhood, but a fixer-upper house.

BRRRR investing is very similar to house flipping; in fact, it IS house flipping, but rather than selling the house, you are going to rent it out after fixing it up. But the same principles that go into house flipping are needed here.

For example, a popular rule of thumb used by many house flippers is the 70% rule. This rule states that the most a flipper should pay for a property is 70% of the After Repair Value (what it’s worth when fixed up), less rehab costs. So a house that has an ARV of $150,000 and needs $30,000 worth of rehab could be bought for $75,000 because:

$150,000 x .7 = $105,000.

$105,000 – $30,000 = $75,000.

Think that’s impossible to achieve? Just ask most successful house flippers, and they’ll tell you that their entire business model is built on margins similar to this. So stop saying, “I can’t do this,” and start asking “How can I do this?

It may require direct mail. It may require Craigslist. It may require driving for dollars. It’s going to take some hustle. But if house flippers can do it, so can you.

Related: The Ultimate Guide to Analyzing Rental Properties (+ Free PDF!)

To finance this first purchase, it’s unlikely you’ll be able to use a traditional lender. Most lenders are unwilling to loan money on a fixer upper. This means you are probably looking at options such as hard money, private money, cash, home equity, and the other strategies that I outline in The Book on Investing in Real Estate with No (And Low) Money Down. So if you haven’t read that yet, start there. It’ll change your life.

2. Rehab

The next phase in the BRRRR strategy is to fix the property up. However, unlike in house flipping, this property will be rented out for a period of time, so the materials you use should reflect that reality.

For example, I’m working on a BRRRR property right now. (I just purchased it last week and am in the middle of the rehab part now.) When my crew tore up the carpet, we discovered beautiful hardwood floors underneath. While this seems great… I’m actually not going to refinish them, yet. To refinish them would cost me around $3 per square foot, or $3,000 total. Then, someday when I go to sell the property, I’ll probably have to refinish them again because of the heavy tenant usage. And that’s IF I can refinish them again (you can only refinish floors so many times before they are sanded too deep.) Therefore, I’m going to use laminate wood floor throughout the entire home. This will protect the floors, for around $2 per square foot, and will look amazing. Then, before I sell it someday, I’ll just remove the laminate and finish the floors then, to sell for top dollar.

The key to rehabbing a BRRRR property is to make the property as “tenant proof” as possible, using materials that will last a long time and won’t need to be redone later. Also, it’s important to rehab with the goal of getting the highest ARV and rent possible. For example, if you can turn a two-bedroom home into a three-bedroom home, do it! This can add hundreds of dollars per month in cash flow and thousands in equity.

Of course, you could do all the work yourself if you wanted, or you could hire it out. That’s up to you and dependent upon your skills, availability and desire. DIY can save you a lot of money, increasing the odds you’ll find a deal that has numbers that work. But it will also take a lot of weekends and evenings.

3. Rent

Next, it’s time to rent the property out to GREAT tenants. Luckily, you just bought a property located in a great location and rehabbed it to look brand-new. It shouldn’t be hard to find incredible tenants to rent the house.

Furthermore, because the property was rehabbed at the start, your repairs and capital expenditures (roof, siding, paint, etc.) should be fairly low for the next few years. Everything has already been fixed! Of course, you’ll still need to budget for repairs and maintenance, but it should be much less than you thought.

Then, it’s time to rent the property out. You might choose to hire a property manager, but because you already rehabbed the property and because you are renting to high-class, great tenants, managing a BRRRR deal shouldn’t be too hard. I would save the money and do it yourself!

Now, to say something a little controversial: The goal of the BRRRR strategy is NOT to make a ton of cash flow. I know, I know — that goes against almost everything I’ve ever preached before. And I’m not saying to buy something that won’t cash flow. I won’t accept long term negative cash flow. Ever. BUT if I’m only making a little bit of cash flow, that might be okay with the BRRRR strategy because the power of the BRRR strategy is in the long “flip” — the equity built. I’ll explain this more in a bit. But first, let’s talk about the next “R” in the process.


(Pssst!! Sorry for the interruption, but I want to make sure you check out this weeks free LIVE webinar: How to Achieve Massive Success Using the “BRRRR”  Strategy to learn even more about using BRRRR to help take your investing to the next level! 

Click HERE to save your spot and learn more! 🙂 

4. Refinance

Earlier I talked a little about how you were going to finance the property and mentioned that it’s tough to get a conventional mortgage on a fixer upper. However, conventional mortgages are REALLY nice. Low interest, long term, easy. So the fourth step in the BRRRR strategy is to refinance into a nice conventional mortgage after the property has been fixed up. And even better, by refinancing, there is the possibility of getting all your money BACK.

Of course, you don’t NEED to refinance the property to get your money back. Perhaps you make great income from a job and can afford to let your down payment/rehab money stay in the property. This will likely help you get better cash flow, and maybe you’ll get a better ROI than you’d get elsewhere. However, if you are like me, you probably want your money back so you can do it again and again. So let’s talk about how to do that.

In other words, let’s go back to those numbers we used earlier. We found a property that had an ARV of $150,000. We purchased it for $75,000 and put $30,000 into the rehab. At this point, we have $105,000 into the purchase.

Most lenders will allow you to refinance a property for 70% of the ARV (in other words, they will do a 70% Loan to Value [LTV] loan on the property). Well, it just so happens that 70% of $150,000 is $105,000… so we could theoretically get back 100% of our invested capital.

That’s right — we’re going to refinance this property with a low-interest, 30-year fixed mortgage for $105,000. This will pay back whatever source of funds we used on the original purchase and rehab. In this example, the only money out of pocket will be the closing costs.

After the refi, you should have a completely stabilized rental property that shoots off a little bit of cash flow and has roughly 30% equity just sitting there. Plus, you’ll have all your money back, so it’s time to…

5. Repeat

The final “R” in the BRRRR strategy is to repeat the process. I mean, it worked once, and we got all our money back, so why not do it again? And again? And again?

Sure, at some point the bank will stop refinancing the properties for you. And maybe you’ll need to find another solution, like a portfolio lender or a partnership. But it CAN be done.

Related: I Used Portfolio Lending to Transform My Business. Here’s How You Can, Too.

Each deal you repeat, you are gaining 30% equity at the end of the day and getting your cash back in your pocket.

How to Make $100,000 Per Year with BRRRR

Now that we’ve covered the five steps of the BRRRR strategy, let’s look at an example of how someone could make $100,000 per year using this process.

Historically, prices of real estate have climbed around 3% per year when averaged out. Yes, some years are better and some worse, but over time, this has been true. But let’s be a bit more conservative and say 2% per year.

Therefore, say we bought a property today with an ARV of $150,000, but paid just $75,000 for it. Then we rehabbed it with $30,000 and refinanced it for $105,000. Then we rent the property out. At a 2% increase per year, this property could be worth $165,000 five years from now. At the same time, the loan during those five year would have been paid down so the balance would be just $96,000.

In other words, after five years, we would have $69,000 in equity. Of course, if we went to sell the property, it would likely need another coat of paint and maybe some other minor fixes. Plus, we’d have to pay the real estate agents about $10,000 as commission. And then we’d pay a few thousand in closing costs. So that $69,000 in equity would look a lot more like $50,000 in profit at the end of the day.

Therefore, to make $100,000 per year using the BRRR strategy, you simply need to buy two deals each year, and starting in year five, begin selling two each year.

As long as these numbers work, you’ll never have more than ten properties, and after five short years, you’ll be making six figures by just doing two purchases and two sales per year. Now, that could truly be a “four hour workweek.”

Of course, if you want to take that $100,000 per year and quit your job, you could. You could buy an airplane. You could go to Tahiti. Or…. you could recycle that money and turn that $100,000 into millions. But for more on that, you’ll need to read my post “How to Make $1,000,000 Through Real Estate Investing.”

The Biggest Drawback of the BRRRR Strategy

At this point you are probably thinking, “This sounds great… so what’s the catch?” As with all investments, there are a few drawbacks to be aware of. There is a looming one that you may have already wondered about: what if you can’t refinance?

If you are unable to refinance the property to get your money back out, you are kind of stopped in your tracks.

Therefore, I recommend visiting a few local banks and making sure you are a good enough borrower before you ever purchase the first deal. Of course, if after the rehab you are unable to refinance the property, you could always wait until the first-year lease is over with the tenants, kick them out, and sell the property.

Having multiple exit strategies is always a great thing and one of the perks of the BRRRR strategy.

Other drawbacks include: What if the tenant destroys the house? What if you can’t find a good enough deal? What if you can’t finance the original purchase?

These are legit questions, but the cool thing is — there are answers! These are the kind of questions asked every day in the BiggerPockets Forums, so if you are not engaging there, you are missing out on one of the most powerful tools you have at your disposal.


The BRRR strategy has a lot of moving parts, but if you work it right, it can be a powerful ally in helping you build some serious wealth.

Following this strategy can help you combine the equity growth of flipping with the tax benefits, cash flow, and appreciation of rental properties, maximizing your profit at the end of the day.

brandon2x-c600c0ad14f7f2c51a0a4e722a6358615a94af66712669f07df0eb1d2e563535(This is the last one I swear! Now that you know how powerful the BRRRR strategy can be – Go ahead and check out this weeks free LIVE webinar: How to Achieve Massive Success Using the “BRRRR”  Strategy to learn even more! 

Click HERE to save your spot and learn more! 🙂 )


So, what do you think? Have you tried the BRRRR strategy in your business?

Let me know in the comments below this post!

About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on Like... seriously... a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of "The Book on Investing in Real Estate with No (and Low) Money Down", and "The Book on Rental Property Investing" which you should probably read if you want to do more deals.


        • Eloise,

          I am an amateur investor with 2 years’ experience and I recentlt ran into this same issue; my duplex had been purchased in the business name (recommended because of the protection that an LLC offers) and therefore, when I went to refinance, so far as my bank was concerned it did not qualify as a primary residence or even an investment property for ME –no loan.

          My lender told me a quick little “secret” though that made the deal work. He told me to go to my local title company and have the property deeded FROM the LLC and into my name personally. From there he could continue to do loan. I’m supposed to close on it early next month, so I can’t say it’s a totally done deal, but right now it looks like its going to work.

          Try that and see if you get somewhere!

  1. Great post. That’s exactly the strategy I’ve used since 2009, but with multi units properties. Buy, fix it, rent, refinance. I don’t understand the comment of Jay C. who said it’s impossible…. I do it all the time.

    The bank send a guy to reassess the value of the building, and refinance it to 80% of it’s value (i’m in Canada). I get the cash back to put as a downpayment on another property.

    • Philippe Laurin

      Hi Steve,

      Where in Canada are you investing? Are the multi unit properties you buy vacant, or do you buy them with tenants in? Also, are you implying that you’re using conventional loans for the initial financing? If so, which bank are you using?

      I’ve been wracking my brains for the last couple of months trying to figure out the best way to implement this strategy, any piece of advice is welcome! 🙂

    • Jon Kepler

      Steve, are you in Ontario? I have implemented this strategy successfully on previous occasions, but my mortgage broker got a condescending, unprofessional email from a Meridian employee yesterday. They accused me of not producing the equity “myself” (whatever that means) and taking advantage of rising market values (is that a bad thing?). I am viewed negatively as a client because, in their words, I now have a “penchant” for this sort of thing.

    • Denise Brown-Puryear

      @STEVE: I agree with you Steve. I’ve done the same thing also and had gotten 30 year mortgages and refinancing on my multi-family in New York that I sold in 2014. This strategy (BRRRR) is something we’ve started doing after the 1031 exchange sale in 2014. We have 2-3 lender’s lined up in NC ready to refinance our rehabbed rental properties. It’s a great way to built wealth over the long-term with all the tax benefits associated with it as well. Refreshing to see buy, rehab and hold strategies written about here!

      Good article Brandon!

    • Brandon Turner

      Actually – my buddy Scott Trnech (works here at BP and writes on the blog) is in Denver and doing this very strategy. The dollar amount doesn’t matter as much – it’s all relative. You also might need to look outside the city an hour or so to get to cheaper prices. Hope that helps!

  2. Kevin Yeats


    I agree with the steps that you have outlined. I have to quibble with the ease of taking each step that you imply. You seem to gloss over several difficulties that make each step a little higher and overall would make it much more difficult to hit that $100,000 per year income level.

    The most obvious is the lack of interest payments (and points and loan fees) associated with the borrowing. Hard money loans are not cheap and certainly not free.

    But taking the rest of the steps in order, you imply that it is relatively easy to find a property with a current owner willing to sell at 70% of value. Why would a current owner not put $30,000 of upgrades into the current property and increase the value substantially and reap the returns when selling?

    When rehabbing, unless the materials suppliers and contractors agree to be paid when the property sells, the investor will need some additional cash or funding for these expenses. More out of pocket expenses before the cash flow (from renting) starts, the lower the return.

    From reading various messages and blogs on Bigger Pockets, especially Eric Drenckhahn’s, finding good tenants takes a certain skill set as well. Reading between the lines, many novice landlords take risk of accepting a sub-quality tenant over the certainty of leaving a property vacant for another month (negative cash flow). This can (not always) lead to bigger problems and higher expenses at some point down the road (late or skipped rent and greater damages).

    It is tough to eat the equity in a rental property.

    Your calculation of profit really calculates the capital gains. While this investor has rented the property, hopefully profitably, it takes a lot more than 2 properties to generate the cash flow to make a steady income necessary for living. The profit that you calculated should be spread over 5 years … or $10,000 per year in your example.

    And every April, the taxman cometh.

    • david johnson


      1. why wouldn’t an owner spend $30k to fix it themselves? Because they don’t have the money. Or the desire, ability, etc, etc. But it mainly starts with not having the money.

      2. He implicitly says it is hard work to find the type of property outlined in his post.

      3. He never says in the article that this is ‘no money out of pocket’.

      4. finding a good tenant – this article states it’s a requirement – but this article isn’t about finding great tenants, or having great rental cash flow – this article is about a system to make $100k/per year using brrrr….

      5. Finally – he’s not saying you can do this right out of the gate and make a ‘living’. keep your job – after 5 years, if you have this down, and you sell your properties as he has outlined, then maybe.

      6. The tax man – another beautiful thing about selling real estate – after 1 year of ownership, you are taxed at long term cap gains. no FICA taxes – also – it’s not all long term cap gains – part of the $50k is loan pay down – $10k, i believe – that isn’t cap gains. and, of course, you are going to pay tax on income – no way around that. but this is better income for taxation v. being an employee or having regular ‘earned income’.

      he’s not making this stuff up, i assure you. it can be done – i can attest.

      • Kevin Yeats

        David, thank for rewriting Brandon’s article and part of my response to it.

        I never accused Brandon of “making this stuff up.” I’m pointing out that Brandon seems to gloss over some very real factors that would create speed bumps to making $100,000 per year. In fact, Brandon should have titled this article “making $100,000 in FIVE years …”

        I know what Brandon outlines is both possible BUT it is also NOT easy.

        The first bump that both Brandon and you point out is finding the motivated seller who is WILLING to accept a $70,000 offer on a $100,000 house because the owner does not have the money to pay for the upgrades. I guess that owner would rather have the money in the bank at 1% interest than to talk to a few contractors who can give estimates on costs and value of the upgrades. Or talk to a few realtors who would provide a BPO. Such a conversation might have revealed the potential to avoid a 30% (+ or -) drop in value.

        In regards to money out of the RE investor’s pocket, how much and is using that money the BEST use (or investment) that is available? The RE investor could have invested in the stock market and could have nearly doubled his/her money over these past 5 years with NO work (S&P 500 index). {I know that I will get blasted for that comment …. blast away}. This same RE investor also COULD have become a hard money lender. How much return would that investment produce? How much over 5 years?

        David, read in the Landlord’s forum and ESPECIALLY read Eric Drenckhahn’s blog to see how easy finding a good tenant is …. and the cost of not finding that right tenant. I’m not a landlord but I’m pretty sure, tenants never arrive with “Great Tenant” tattooed on their foreheads.

        • Nathan W.

          Your questions are honest, but they are honest because you are truly ignorant of things like the 70% guidelines and how rehabbers make their profit, and how landlords effectively manage their income properties.

          Most of what you write (like the points and interest on hard money lenders for instance) show that you have a basic grasp of the concepts, but do not truly understand what is being written.

          At the risk of you accusing me of “restating what Brandon and you wrote” since you did to the last guy that actually pointed out why you were wrong and you subsequently chose to ignore or were unable to understand, your comments either do not make sense or are addressed by other real estate investing techniques.

          For instance, you mention “the lack of interest payments”. When a landlord buys a rental property they are taking all expenses into consideration (repairs, maintenance, cap ex, vacancy, and PITI) to determine their cash flow. This strategy works even with a cash flow neutral property (i.e. your monthly rent covers all your expenses) because you are not relying on the cash flow, you are relying on the forced appreciation, market appreciation, principal paydown and eventual sale of the property. The monthly rent covers the “lack of interest payments” red herring you brought up.

          For your question on why a distressed owner wouldn’t just rehab the property themselves and sell it, I have already wasted too many words. You just simply have no clue about the rehabbing world–it doesn’t make sense to you because you know nothing about it. There are many resources on bigger pockets explaining the 70% rule and more rehabbing/flipping strategies than you can shake a stick at.

          You mention something about contractors being willing to be paid for their work when the house sells. you did read the article right? That the house sells 5 years down the line? Not sure why you think this is a salient point that “additional funds need to be procured out of pocket” since those were accoutned for in the purchase price ($70k purchase, $30k rehab). Maybe you are just confused because Brandon didn’t explicitly say that “Hey Kevin, to do this strategy you are going to have to figure out how to come up with $105k RIGHT NOW to start your investment”? I am not meaning to put words into your mouth, just trying to see things from your angle. But I guess to summarize, yes it does require some up front cash. He mentions you can attain this through other creative means if you do not have it right now. You may need to research those a bit.

          Yes it is hard to find good renters. But millions of landlords do it every day and seem to make a profit every month.. The nice part about this strategy is that you don’t even have to make a profit every month! Remember, cash flow neutral is ok and any additional cash flow is icing on the cake. Putting quality tenants into housing becomes much easier when you buy in good neighborhoods and screen them properly. There are management companies that will do this for you as well, and if you are buying at the 70% rule you really should ahve no trouble paying property management expenses of 10% a month while remaining cash flow neutral/positive unless you are in ridiculous housing markets like San Fransicsco or New York

          “it is tough to eat the equity in a rental property”. I have no idea what this means.

          You mention it takes much more than 2 properties. Well yeah, Brandon mentions that as well. It was down in the article though so you might not have made it that far. It does not make any sense to do what you suggest and say that it needs to be spread over 5 years at $10k/year because you are only making your profit when you sell in year 5 (twice in year 5), year 6 (ditto), ad nauseum. I ahve no idea what point you thought you were making there, unless you somehow thought the profits were from the rental cash flow? Yes you are profiting your capital games, which is a very real dollar amount and not just some theoretical number.

          Of course the tax man comes in April. He comes from my W2 job too. I still think it is pretty cool to make 6 figures. Your argument is valid if he goes on to say that you can then buy 100,000 dollar menu burgers from McDonalds with your profits, or otherwise accoutn for the entire $100k for somehting else, but he doesn’t. So your argument was a non-sequitor.

          OK, I need a nap.

        • David H.

          I’ve been using this strategy since 2008. It’s easy ?. And yes, the numbers quoted above are very realistic, and I’m actually beating those numbers.

          I almost feel like I’m picking the low hanging fruit. Invest in areas that no one wants to go in. There’s less competition. Upgrade the home to new, hold out for good tenants who can pay a deposit $500 more than rent. Solid cash flow. It’s real and easy.

  3. I like the strategy,
    An idea that I personally like better than The risk of the fefi and the bother of the time line with the hard money leg breaker is the guy who can see the inevitable, knows he could spend the money himself and sell out in the main stream but doesn’t feel the time, the risk, and the all at once cash flow will work in his ( or Her ) favor so staying involved is not unheard of for them.
    We only want your 2 deals so I opt to never spend all the money you want to get back until the final stage.

  4. Darren Sager

    Excellent Blog Post Brandon! The hardest aspect of this is creating the money relationships. I’d say everything else can be learned, but having the right relationships in place is priceless to your investing ability. It doesn’t matter how much capital you have on hand, only $5,000 or $500,000, you still need to get the money relationships right to build this.

    In my mind Brandon you’ve done this exceptionally well.

  5. Jay Helms

    I started using this investment strategy last year. The two biggest hurdles I’ve had to “hurdle”:
    (1) finding the initial investment funds that you don’t have to repay (we found this using Dave Ramsey’s Total Money Makeover).
    (2) finding banks that will convert to a 30 yr conventional. For complete personal protection, all of our assets are titled to our LLCs. After interviewing 10+ banking institutions, most local, the only one I’ve found to lend to LLC will only do a commercial loan for rental properties titled to an entity. If anyone has a suggestion in this area, I’m all ears.


    • david johnson

      find a bank that keeps their loans for their portfolio – most banks today simply sell their loans ‘up the food chain’. their are some portfolio lenders out there. i’d start with them. i know for a fact that at least some banks lend on properties owned by llcs. i’m not sure on all the ‘minutia’ but the bank that i know does is a bank that holds their loans in house. good luck!

    • Chad Hale

      I’ve found similar results as you. Using an LLC puts you in the commercial lending space at higher interest rates.

      If you are looking for protection, an LLC may not be as great as you think. An LLC offers little protection to negligence. Some states (like CA) have LLC filing fees every year. A solution, carry liability insurance. It is always a risk/reward trade off.


  6. Jason R.

    I’ve recently explained this strategy a few times to some investors, but holding longer than 5 years and purchasing more than 2/year. It’s very feasible, but lining up the refi aspect is the most important in my mind.

  7. Jeremy T.

    Great post – simple, clear and easy to apply to my own situation. One question for you/group: Most banks won’t lend to ‘uninhabitable’ places or at least they prefer not to and throw a lot of red tape around if you try to. However, some of the best deals are picking up places post eviction that are trashed.

    Can you buy an uninhabitable place, put 5-10k powder puff into it so it’s habitable and then within 6 months of purchase use delayed financing to fund acquisition + renovation expenses up to 80% of cost? In this case you only have out of pocket the 5-10k quick fix + 20% down payment versus the alternative of full acquisition + full rehab waiting for a year to cash out refi.

  8. Philippe Laurin

    This is exactly the strategy I plan on implementing, except that I would plan on holding the properties long-term instead of selling after 5 years. I’m glad to see it put in writing like this, good job!

    I’d like to know if anyone has implemented this strategy successfully in the Montreal area, or even in the Quebec province in general, on 5+ unit properties, or even 3-4 units. One of the hurdles for this strategy to work here is the government (Régie du logement) making it hard to raise rents if there are tenants in. It seems much easier to implement in states/provinces where there are no such laws. I’d be happy to get feedback from fellow Canadians 🙂

    • Philippe,
      I invest in Montreal in 4 to 6 units buildings. I buy with tenants already there. When one leaves its place, I fix the apartment, increase the rent, then rent it again. Yes you can definitely increase your rent, especially when you change tenants. Forget about the “Régie”. Don’t follow their recommandations. If you are very unlucky, yes these people can make you troubles… but it never happened to me in the last 7 years!

      • Philippe Laurin

        Thanks for the feedback Steve.

        I don’t have a problem raising rent when tenants leave, it’s more when they stay there that it can be an issue. If you have to wait for tenants to move out in order to fix the apartments and increase rent it can take a long while to reach the full potential of the property. This will slow down the refi process as well. Let’s say it takes 5 years for all tenants to move out, then you have to either refi after each fixed up unit (not very practical), or wait the whole 5 years to refi, which prevents you from reusing your capital in the meantime. Any thoughts on this?

  9. Great post. I have started using this strategy in the south shore, cape cod area of MA. After flipping my first property successfully and making a great profit, I purchased two investment properties last year. This year filing taxes made me want to puke when I realized I need to first pay the tax man on my profits before buying another property. Rookie move. The funds put into rehabbing and purchasing my two other investment properties gets depreciated not written off in a lump sum. I don’t think I will ever sell a home after renovation again. Makes much more sense to use the strategy you have above but hold and only 1031 to larger, better cash flowing properties. I have 2 projects going on right now and a 3rd and 4th coming up next month. Rehab is complete on one of them and the lease is starting in a few days. A little nervous about the refinance part, but have established a great relationship with a mortgage broker and he has assured me it won’t be an issue.

    • Nathan W.

      I am not sure why you think it “makes much more sense to use the strategy you have above but hold and only 1031 to larger, better cash flowing properties” when the whole point of the post is to make $100k/year based on the sale of the appreciated assets. Capital gains taxes are, what, 20% now? He accounts for this in the math. 20% of $100k in profits is a LOT less than what a lot of people with W2 income are paying on their taxes, and even part of that $100k is deductible since it is not all capital gains.

      Your strategy is a very valid one but not within the scope of this post, or am I missing something?

  10. Eric Munson

    I am currently using this strategy with a couple of properties.
    I have a diary thread that started last weekend called “diary of a BRRR in Deltona Fl from Ct”. Please follow along as I just got this under contract and is 100% owner financed at 0% interest for two years.
    As you know…we make our money when we BUY! Holding while the principal is paid down and you hopefully get some appreciation can be a very powerful wealth building strategy.

  11. Nathan W.

    I really like your strategy Brandon. It seems some people didn’t quite grasp it, but I think you did a great job of laying it out in easy to understand terms with manageable numbers. My only gripe is more of a nit, because I know your strategy is more about the CONCEPT to make people think about how to approach the problem, rather than a HOW TO. But to that end, I find articles like that to be a bit frustrating when inflation is not taken into account.

    For instance, if your house appreciates 2% per year (I am assuming this is not an inflation adjusted number) and inflation runs at 3%, then you have not actually gained $15k in market appreciation in your scenario. You have actually lost about $7k, so you have a $22k spread on your profit in the wrong direction. That is quite a significant difference!

    • Erin N.

      Ok, maybe I’m thinking about this wrong, but I don’t see how inflation comes into play when we’re talking about having little or no capital tied up in this. These are the steps as I see it:

      1. get a hard money loan for $105k ($75k purchase plus $30k rehab) and pay only closing costs out of pocket (average US closing costs are $3700)
      2. After renovation, finding tenants, seasoning, etc refinance into a 30 year conventional loan for $105k. Maybe another $3700 in closing costs??
      3. 5 years later sell and net $50k (per his example).

      So, he spent $7400 and then in 5 years made $50k off of it. There is nothing that I can think of that you could invest that $7400 in that would net you $50k over 5 years. If I’m missing something, please let me know.

      I’m actually in the midst of this strategy myself on a duplex I just bought…although I was sort of forced into it when my conventional loan fell through and I had to purchase with a private loan. I’ve run the numbers every way I can think of, and it turns out to be an excellent deal that gives me $700-800/mo positive cash flow in the interim.

      I would truly like to understand if I’m thinking about this the wrong way. Thanks.

      • Nathan W.

        What you are missing is that the $50k in profit is in 2020 dollars, not 2015 dollars, while everything else you are discussing is in 2015 dollars.

        In this example, your house is presently worth $150k and you will sell it in 2020 for $165k, if housing appreciates at 2% per year. If you have $150k right now in 2015, and invest that at 2%/year, say in a CD (which is equivalent to the gain you are getting from the appreciation), then in 2020 your principal would have grown to $165k. BUT if inflation is at 3% per year, your investment is losing value each year. You will NOT be able to buy something for $165k in 2020 that you can now buy for $150k in 2015–that “widget” will cost somewhere north of $165k in 2020

        As I pointed out above, if that $150k house is only appreciating 2% per year while inflation is running at 3%, it will only be worth the modern day equivalent of about $143k in 2020 due to the 1% deficit in the appreciation from the inflation. The actual value of your future gain, when viewed in terms of what it can buy TODAY in 2015, is only $28k. I’m not saying $28k is a bad gain, but I am pointing out that it is quite a bit off the $50k mark advertised–like I said I love reading Brandon’s stuff since he really gets my brain juices flowing, but he has said himself to not view his writings as a HOW TO INSTRUCTION MANUAL but more of a guide to understanding the concepts and paving your own path.

  12. Michael Saberniak

    This is what I am trying to do as well minus that selling after 5 years, that part does not make much sense in my market as you would have to reno the house again in order to get top dollar after having tenants in there for 5 years. My approach is to sell most of the single family properties immediately after reno and keep the multifamily properties long term with 15 year amortizations as we can cashflow them with a 15 year note. This makes a huge savings in interest. So I am focusing on small multifamily as that seems to be where the cashflow is. Appreciation in the market seems to be very slow up here at least right not too, making cashflow even more important.

  13. Chad Hale

    I like your strategy, no love it! I’ve been doing this for past ~3 years in California.

    There are many variants. Buy with or without tenants. Do you evict and renovate all units immediately or wait for some to leave bearing in mind that you are dealing with human beings while also wanting to maximize your investment. How do you handle rent controlled units that have below market rents. When do you refinance? Depending on market it may make sense to wait until prime selling time to get a higher valuation which means more $$ returned to you. My goal get as much cash out while maintaining positive cash flow and building reserves for the inevitable issue(s).

    Also agree with using great materials without breaking the bank. Get better tenants and fewer “emergency” issues. If the market turns sour, having a better unit compared to the competition keeps yours occupied.

    Thanks for the article Brandon!


  14. David Faulkner

    Thanks for a great article, Brandon! I practice this method myself and like it much better than the 1031 trade up method that you wrote about in a previous article. It is much easier and less costly to cash out refi then to sell and buy (1031), and you get to keep the property. The last thing I want to do after taking all this time and effort buying, fixing, and renting a property is sell it!

    One thing I do differently, because I can and I find it works better, is buy and rehab the property with cash (no loans against the new property). It makes my offer strong, making it easier to get the kinds of discounts discussed. More importantly, the investment is riskiest in the beginning (after it is Bought, but before it is Rehabbed or Rented) , so that is when I want to be extra conservative in financing. Once I get the property rented, stabilized, and validate my cash flow projections, the risks go way down, so that is when I cash out refinance to enjoy the power of leverage over the long-term and move my cash on to the next deal.

  15. Ronnie C.

    I started a thread last week asking how can I make a “LIVING” in real estate ?

    I don’t know ANY local/community banks in the middle TN area that will do conventional financing to start with on this type of situation. Only a commercial loan with 20 yr arm and 5 year call.
    The hardest part is finding the DEAL. No body does MAO anymore and that’s another thing that is killing the flipping market. How can you make money at 80% or more of ARV? It simply doesn’t work!

    I live in a market that is a desert, and deals are impossible. TV watcher graduate wanna b’s are out here paying 80-90% of ARV for houses and getting nothing or a couple thousand dollars at closing and think the are flippers..LOL
    I use to be a full time Realtor, retired license and started flipping. Got hit in the market crash and got out. Spent over 3 months last year trying to find a deal via networking, wholesalers, letters, postcards, etc, etc. Nothing! I still have MLS and CRS access too.

    I have sold some houses on LP’s in the past and it was a pain, therefore makes my skin crawl at the thought of dealing with dead beat renters.

    But IF I could find the deals, and IF I could find a bank that would do that type of loan, and IF I could keep renters in the house, I can see where your plan would work.

    Any suggestions on where to find a deal in this desert?

  16. Rodney Kuhl

    This is the exact strategy I am working on now, only I’m only to the rent part as of now. The difficulty I’ve run into in this strategy isn’t finding a lender who will do a re-fi, but finding a lender who will re-fi before owning the property for 1 year first. If you were using a HML, that would create another problem. Maybe I haven’t looked enough or just haven’t found the right lender, but I haven’t been able to find someone to help me re-fi before owning a property for a year. The strategy can still be used then (I’ve purchased with conventional mortgages in the first place but have gotten good deals and have good equity in a couple of properties), but it will be at a slower pace I think.

  17. A direction-less approach in real estate may probably end up in exhaustion. At first look, it’s really a brrrrr make such a claim. Appreciate your wonderful plan that you have made step-by-step to confirm planned returns. The 5 points sound outstanding, only needing to go highly balanced with in-between depreciation seen. Refianancing portion sounds so tricky. All the steps if taken along reasonable field knowledge and time spans (considering rental earnings) can create really a big gain. Great Info!!

  18. Anant Lal

    Why sell the houses?
    If you’re buying at a discount, and they are all cash-flowing why don’t you just keep them and increase your cashflow to 8.33k per month. Once you refinance you should be able to get your initial investment out and you can still do all of these steps. That way you get a pay raise every 6 months rather just staying at 100k forever.

  19. I loved the article everyone has made compelling arguments. But I think the goal for the this article is to open up a perspective and strategy. The great thing about it is as I read the comments I see you have alot of people who have been successful using this method. The only thing that needs be done is duplicate the process.

  20. Manmit Singh

    I personally want to implement this strategy, we have capital as well, only challenge comes is to find the reliable property management and refinance the properties to Canadians, unless you have both this strategy wont work out. but I am open to all the suggestions to make it work in less competitive markets.

  21. Bruno C.

    This is an AWESOME strategy Brandon and killer post! I did this on my first property in Boston, and the benefit has been incredible. Mark Ferguson seems to do a variation of this as well and it’s a great way to increase returns. Nice post!

  22. Elizabeth Matos

    Oh I’m so excited! Bradon just reinforced what i have basically done with my first purchase. Only I have not sold it yet. I was going to do one at a time but I guess I will have to move up to two. Anyway my I have gotten sidetracked with this plan because of life. So I had to move into my rental because my husband kicked me out and I had to evict my non paying tenants. Anyway now I rent out rooms and which covers my mortgage and utilities. I am now unemployed so I am using creative financing to make my next purchase. Hope to make tow this year. One to keep and one to flip. Thanks for the calculator! Brandon… you and the BP community are the best thing I have happened on. Thank you, all.

  23. Thomas Hubbard

    Can anyone please explain to me the “getting back 100% of our invested capital” portion of the article? Purchase price + rehab costs are $105,000. If you refi at $105k thats a wash. With ARV at $150k minus $105k leaves $45k. Is the $30k in rehab costs what’s being considered as 100% of invested capital?

  24. Randall Hunter

    I’m new to BP and to investing so perhaps this question is way off and I just don’t fully understand investing in real estate yet.

    If you were to purchase the $75k house in all cash up front and used all cash for the $30k rehab, you can still refinance after the rehab? I understand refinancing a loan you used to make the initial purchase but if you paid in full with cash then what are you refinancing? The house is already yours…?

  25. Boyd Dixon

    He paid with hard money, and that is what he is refinancing. Hard money is extremely expensive, so it is necessary to get out of that loan as quick as possible via refi with conventional. The point of the hard money is that conventional lenders won’t lend on houses that need lots of repair, so the hard money gets you through the repair and then it is time to refi asap.

  26. alan r.

    Newbie here. This was very interesting. I have been listening to the podcasts and wanting to learn more about brrrr.

    I’m confused on the initial purchase. Using Los Angeles prices. I was looking at a property for 400k. If I put 30k into it I think it’s worth 500k. Using the 70% model I know the price I should be buying it at is 350k. But assuming this conservative scenario, lets say I buy for 400k.

    Would it be wrong or unwise to go to the bank and put down 20% if I could afford it and do a 30yr fixed mortgage? Not sure If I’m missing the point with the refi that comes in the last step.

    After the rehab I would rent it. Realistically probably getting 2k month in rent (seems like the 1% rule or 2% rule doesnt work in LA or other expensive cities).

    Now I would do a refi and assuming I put down 20% (80k), and it’s worth 500k, I would get a new 30 yr fixed mortgage and ask for cash for the difference of 500k – 400k? So I would get 100k minus the 30k i invested and be left with 70k?

    Any help would be much appreciated! Not sure I fully understand the concept.

  27. Love this strategy. It’s much more conducive to a “lifestyle” business than a full on flipping business. I’m not sure why hitting a financing roadblock is necessarily a bad thing. By the time you get 2-3 properties, you should be cash-flowing decently. If you really did acquire for 70% or below ARV minus repairs, I’m not sure how there’s any possible way that you’re cash flow neutral or negative, EVEN if you’re investing in San Francisco!

  28. What is the ultimate goal with BRRRR?
    Wanted to see what is everyone’s ultimate goal with this strategy. Is it, at the end of this chain of transactions to own a few property free and clear and have less tenants and less turn over to deal with? Is it to build equity and then own it free and clear? Or is it to own as many properties as possible, all conservatively leveraged out and have tons of tenants/turn over and tons of bills to pay every month?
    I am up to 8 units and I find it a little bit too much and feel like I am a property manager at this point. I feel like I have more freedom and peace of mind when I have one less bill to pay (which is usually the biggest one = mortgage).

  29. No one here has really commented on the fact that this is in reality a 50% Rule . . . not 70%. There are always Rehab costs and lets say the average is 20%, therefore the rule is ultimately a 50% rule. . . . you would Never buy a house for 70% because the figures do not work. I know you say this in black and white in your text above, but its not stated explicitly that you are offering the current owners 50% and not 70%. This makes the deal finding very hard and even a motivated seller could find another purchaser willing to pay more than 50% for their house. Everybody seems to be trying this out these days, so purchasers are numerous and that in turn is pushing up the prices offered. Is this in reality a strategy that can work, where you have to buy every house at half price ?

  30. Camilla Sauder

    I, too, would like to know the ultimate goal of this strategy. In your 20’s and 30’s and maybe even 40’s, one might consider constantly looking for, buying, rehabbing and selling properties with mortgages. As one nears retirement, however, in my case being early 50’s and shooting for my husband quitting his job in the next two years, isn’t the goal to have everything paid for and live off the cash flow without working?

    • Charles Morgan

      You could theoretically refi every 5-10 years to get your equity out without selling. To me that would be ideal as long as the property is maintained and the area is still a good one. That should avoid the tax hit but may produce less cash than a sale.

  31. Corey Smith

    Great article! And the BRRRR strategy really excites me and is the method that I’d love incorporate.

    The part about selling two (or whatever number) and buying two after five years or so is something that I hadn’t really thought of. But that is an awesome idea!

    Thanks for the idea!

  32. Ramon Cervantes

    My 2 cents. I am planning on employing a hybrid method (brrrr / flip), flipping to make a profit above and beyond my small business, and brrrr if I happen on a great piece of property. I heard here before that you take what the market gives you, so if I don’t start making 100k in 5 years, it will be more or less…and that’s great!

  33. I love this strategy but the part that I can’t seem to get my mind around is the hard money part.

    So if I borrow the initial amount from a hard money lender, how do they get paid when I refinance into a conventional loan? I’m sure it’s an easy answer, but I don’t understand it.

    If the conventional loan only covers 70% of the amount, then it seems that the hard money wouldn’t receive their full payment back.

    Please explain…

    • Derek Myslinski

      When you put value into the home you purchased at a discount, this will create more equity than the cost of purchasing and repairing a home. That’s what the 70% rule tries to stress. You only buy a house at a cost that after your repairs your money is now 70% of the equity of the home. So if you put 70k into a house that is now worth 100k, you can get your 70k back from the loan.

    • Thanks, Derek for your response. However, I understand how equity in a home works, but my question doesn’t really relate… at least I don’t think.

      My question dealt more with HOW does the hard money lender get his money back when I refinance into a conventional loan?

      If I receive $70,000 from a HML and after 12 months I refinance into a conventional loan… HOW does the HML get his money? Does the bank pay me money? Where does the money come from? That is my real question.

      I guess my confusion is because I have only used conventional loans to purchase homes in the past. When I apply for a loan and the bank accepts, I don’t see any of that money. The bank pays the seller and now I owe the bank.

      However, it seems like in this scenario, that the banks pays me and in turn I pay the HML. Is that correct?

      Like I said… I am confused about this method and it is just my newbieness shining through. Thanks.

      • Buy a house using HML for 60k plus 10k in repair. Go to the bank who now appraises it at 100k and is willing to finance at 70%. Via your lawyer the bank moves 70k (100k * 0.70) to the HML. Now you’ve got a “free” leveraged house (and you’re up 30k in equity).

      • Chad Carson

        The mechanics work just like paying off any other loan. The hard money lender sends a $70,000 payoff to the closing attorney for the refinance, and the attorney wires the $70,000 to HML. All of the cash is handled at the closing table.

        • john norman

          Thanks for providing some more of the insider-baseball tips with this strategy, I too am scratching my head a bit as to how this 100% pans out IRL.

          Anecdotally, I either get things right away or I need a preschool-level diagram to cross the finish line…the ‘Refinance’ step for me, is the latter.

          I’m going to lay out my current understanding, and hopefully one of you amazing BP members can help clarify:

          1. Acquire hard money loan (let’s just use this as our example) for $105k. For simplicity’s sake I’m lumping the purchase and rehab costs together.
          2. 30yr fixed conventional refi from Bank ABC for $105k.
          3. Hard money lender gets their $105k back via wire from closing table, and besides closing costs this purchase was virtually ‘free’.
          4. The next step is where my novice understanding gets the better of me, where Brandon says he gets a loan for $105k with 30% equity “just sitting there”. Since our loan is $105k, is this the step where we use either a revolving line of credit/HELOC to access that equity to eventually ‘Repeat’? Are the equity monies assumed since the existing mortgage only covers 70% LTV?

          2 other smaller questions:

          Sub-question for step 3: Doesn’t the math of the ‘Refinance’ step leave out the interest payments on the initial 105k loan? Or are interest payments assumed in the monthly expenses and the $105k lump sum from the closing table is just purely reimbursing the initial investment?

          Sub-question for step 4: While it seems cool to have 30% equity to tap in to, what about the advice of certain BP folks like Brad Lohnes who say it’s wise to never dip below 20% in available equity (certainly never below 10%)?? If we were to follow that advice and only access $15k worth of equity from Brandon’s example, is that really a proper fiscal catalyst to ‘Repeat’?

          Appreciate any guidance! This community is an amazing resource thank you!

  34. Renee Ren

    Sounds like a great strategy. My question is how soon can I refinance the property after purchase and rehab. Also refinance requires income qualification. If a borrower doesn’t have a W2 job and his income is not stable, how does the bank fund a conventional loan to him. Does a portfolio lender do that?

  35. Marcus Ko

    I don’t see how this works after the last step of refinancing. How do you buy another property if let’s say you used a conventional loan for the first property. I can see getting some money back from the refi, but I don’t see lenders giving me another loan for my next purchase to repeat.

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