BRRRR Method

• Purchase a distressed or undervalued property, usually below market value.
   
• Often funded with cash, hard money loans, or private financing.
   

• Renovate the property to increase its value and make it rentable.
   
• Focus on improvements that boost ARV (After Repair Value) and appeal to renters.
   

• Rent out the property to generate monthly cash flow.
   
• A rented property also demonstrates its income potential to lenders.
   

• After the rehab and renting, refinance the property at its new, higher value.
   
• The goal is to pull out most or all of your initial investment.
   
• Replace high-interest short-term financing with a traditional mortgage.
   

• Use the pulled-out equity/cash to buy the next property and repeat the cycle.
   

1. Maximize Leverage
   You can reuse the same capital to acquire multiple properties.
    
2. Build Wealth Faster
   Forces appreciation through rehab, then locks in long-term financing.
    
3. Cash Flow + Equity
   You generate rental income and build equity at the same time.
    
4. Grow a Portfolio Efficiently
   Ideal for scaling without needing large amounts of fresh capital each time.
    
5. Tax Benefits
   Depreciation, interest deductions, and 1031 exchanges can reduce taxes.
    

• Rehab overbudget: Unexpected costs can ruin profits.
   
• Refinancing issues: If appraisal comes in low, you can’t pull out as much cash.
   
• Vacancies or bad tenants: Affect cash flow and loan qualifications.
   
• Market risk: A downturn can reduce ARV and rental income.
   

Use the BRRRR method if your goal is to scale your rental portfolio using limited capital while building cash flow and equity. But it requires knowledge, planning, and risk management to do it right.