You don’t need a fortune to get started in real estate investing. With the right strategy and the support of an asset-based lender like LMC Alternative Capital, you can supercharge your returns and build wealth over time.
Enter the BRRRR method—an innovative and highly effective real estate investing strategy that allows you to grow your portfolio and generate passive income efficiently.
If you’re looking for a smart, scalable way to maximize your real estate investments, this guide is for you. We’ll break down how the BRRRR strategy works, step-by-step, and explain how you can make it work for you.
What is the BRRRR Strategy?
BRRRR stands for “Buy, Rehab, Rent, Refinance, Repeat.” It is a real estate investing approach that revolves around purchasing distressed properties at a discount, renovating them to add value, renting them out to generate cash flow, and then refinancing them into larger mortgages to extract equity.
The ultimate goal? Use the money you pull out from refinancing to purchase another property, repeating the process to scale your portfolio and increase cash flow. This strategy offers the best of flipping and rental investing in one slick package.
Now, let’s walk through the BRRRR strategy step by step.
The BRRRR Method Step-by-Step
Step 1: Buy
The first step is finding a property you can buy below its market value. Look for distressed or undervalued properties where there’s room to add value through renovation.
When calculating your budget, don’t just focus on the purchase price—factor in repair costs, holding costs (e.g. loan interest, property taxes), and expected market conditions to ensure the deal will be profitable.
Pro Tip: Work with a private lender like LMC Alternative Capital who specializes in asset-based loans to secure quick funding and analyze the financial feasibility of the deal.
Step 2: Rehab
Rehab is where you enhance the property’s value. The goal is to make the property livable, appealing to tenants, and worth more than its initial purchase price.
Common rehab tasks include painting, flooring, roofing, kitchen upgrades, or adding modern appliances. It’s essential to balance quality improvements with cost efficiency—spending too much can cut into your profitability.
Remember: Time is money. A fast rehab means you can get the property rented sooner, so plan carefully and keep your renovations on track.
Step 3: Rent
Once renovations are complete, it’s time to list the property for rent. Research market comparables to determine a competitive price, and focus on attracting trustworthy tenants who will treat the property well.
Screen every applicant with background checks, credit reviews, and income verification. Once leased, the rental income will help offset expenses like the mortgage, taxes, and insurance, setting the stage for positive cash flow.
Step 4: Refinance
Now it’s time to leverage the property’s new value. After a seasoning period (often 6-12 months), lenders will appraise the property’s after-repair value (ARV). This valuation allows you to refinance into a long-term loan and unlock the equity you created.
For example, if your property appraises much higher after the rehab, your refinance could free up most—if not all—of the money you initially invested. The key here is to work with a lender like LMC Alternative Capital who understands BRRRR financing and can offer terms that make sense for your deal.
Important: Avoid overleveraging. While refinancing is an effective way to scale, keeping a financial buffer to manage monthly expenses is crucial.
Step 5: Repeat
With equity cash in hand, it’s time to repeat the process. Purchase another distressed property, rehab it, rent it out, and refinance again. This snowball cycle allows you to build both cash flow and equity across multiple properties.
Over time, you’ll grow your portfolio and income stream, paving the way for financial independence.
Why Choose the BRRRR Method?
Here are some key advantages of the BRRRR strategy for real estate investors:
1. Amplify Return on Equity (ROE)
When you refinance and reinvest your equity, you maximize its earning potential across multiple properties. Instead of letting equity sit idle in one property, you spread it across several, generating higher cash flow.
2. Scale Faster
Saving for down payments can take years, but with BRRRR, the equity you extract from one deal funds the next. This eliminates the traditional roadblocks to scaling your portfolio.
3. Build Long-Term Wealth
The BRRRR method offers a layered approach to wealth-building. By owning rental properties, you gain cash flow, equity, and the benefits of real estate appreciation—three paths to financial growth.
Potential Risks and How to Avoid Them
While the BRRRR method is incredibly effective, it’s not without risks. Here’s what to watch out for and tips to mitigate these pitfalls:
- Financial Miscalculations: Use a BRRRR calculator to factor in realistic numbers for repairs, rent, and ARV. Always leave a financial cushion for unexpected expenses.
- Overleveraging: While leveraging is great, overdoing it can lead to negative cash flow or problems during market downturns. Work with a lender like LMC Alternative Capital who prioritizes sustainable financing.
Finance Your BRRRR Ventures with LMC Alternative Capital
The BRRRR strategy is a proven method for scaling your real estate portfolio while building equity and cash flow. It gives investors like you the tools to unlock financial freedom—but only if executed with the right knowledge and team.
At LMC Alternative Capital, we specialize in providing financing for BRRRR deals, including short-term bridge loans and long-term rental refinancing. Our expertise ensures you’ll have support at every stage of the process.
If you’re ready to kickstart your BRRRR strategy, we’d love to help. See if you pre-qualify for financing today and take the first step toward building your real estate empire.
