Chapter 1 — Getting to Know the BRRRR Method
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It’s the order you buy a rental property in, set up so you can pull your cash back out as efficiently as possible. If you want to own more than one or two properties, it’s the best way to buy. And the goal isn’t to grow your wealth at a steady rate. It’s to grow it at an exponential one.
The most important thing a real estate investor can do to build wealth is add value to a property. You can pay less than it’s worth, which is called buying equity. Or you can fix it up so it’s worth more, which is called forcing appreciation. The trouble with the traditional way of investing is that you finance the property first and put your own money down. By the time you’re done, so much of your money is stuck in the property that you can’t use it to buy the next one. And the next property is where you always make the most money.
BRRRR uses the same steps in a different order. You pay cash for the property. You rehab it, so you’ve added value before you borrow anything. You rent it out and collect cash flow right away, and that cash flow starts out higher because there’s no mortgage yet. Only then do you refinance. Now the bank is valuing a fixed-up house that’s worth more, so it lends you more.
In the traditional method, you finance first. In the BRRRR method, you finance last. That small change is the difference between someone like David Greene buying two houses a year and buying twenty-four. Small hinges swing big doors, and BRRRR is the ultimate small hinge.
The idea behind it is the velocity of money: how many times you can make the same dollars work for you. Greene thinks of it as how many houses he can buy with the same dollar. If a property earns a 10 percent return each year, you’d wait ten years to get your money back and invest it again. But if you pull out 100 percent of your cash, you can buy the next property right away. The book shows the gap with two investors. Tom used the traditional method and earned a 14 percent return. Mike used BRRRR and earned nearly 71 percent.
So don’t be afraid to borrow. As long as the return on your money is higher than the interest rate you pay, you come out ahead. The traditional method lets your money be lazy. BRRRR makes it work. That’s why the author often tells new investors to hold off on their first property until they’ve saved, partnered, or found another way to buy a fixer-upper with cash. BRRRR your first deal, and the second comes faster. BRRRR that one, and the third comes faster still. It’s worth starting later so you can move so much faster once you begin.
Two cautions come with that. Fear is healthy, but you can’t follow it blindly. When a sign on the beach warns about high tide, you don’t skip the ocean. You check the tide. If it’s low, go surfing. If it’s high, wait. If you can’t tell, learn more before you jump in. And volume amplifies your results, good or bad. When you’re losing money, more deals means losing more. So move slowly until you know your process works. Then turn up the volume.
Chapter 2 — Buying Under Market Value
Every deal you buy should be as far under market value as you can get it. “You make your money when you buy” is one of the oldest and truest sayings in real estate. Those discounts come from distress, and there are three kinds.
Market distress is when a whole economy or area hits a rough patch. Deals are easy to find then, but you can’t control when it happens, so relying on it means a lot of waiting. Personal distress is when something in an owner’s life, like a divorce, a lost job, or a death in the family, is hurting their finances. It brings the biggest margins, but it’s the hardest to find. Property distress is when the house itself is in bad shape, with a leaking roof, foundation problems, or termite damage. It takes the most work, but it’s the easiest to target. As a BRRRR investor, this is where you’ll spend most of your time.
Two rules help you screen deals. The 1 percent rule says that if a property rents each month for 1 percent of what you paid, it will likely make money. It matters most for cheaper homes, which is where most investors buy. A $50,000 house needs to rent for close to $500 a month, but a $500,000 house doesn’t need $5,000. Treat it as a quick first screen, not a final answer.
The 75 percent rule says your total cost, the purchase plus the rehab, should come to 75 percent of what the property will appraise for when it’s done. You’re paying 75 cents on the dollar. That number isn’t random. Most banks lend up to 75 percent of a property’s value, so hitting it lets you pull your money back out when you refinance.
That means you need to know how a property gets valued. A single-family home is compared to nearby homes of similar size, bedrooms, and condition, called “comps.” To raise its value, you improve it to match the nicer homes nearby. An apartment building is valued like a business, by the profit it makes. To raise its value, you raise its profit. Appraisers also differ by region. In California they care more about location and condition. In the South they lean on price per square foot, so adding square feet to a small house is the fastest, cheapest way to add value.
Put together, Greene looks for three things in a deal. He wants to be all-in for 75 percent of the value after repairs. He wants it to cash-flow. And he wants it in an area that won’t give him headaches.
If the math makes you nervous, remember one line: “Overcome fear with math.” Start by focusing on two things: how far under value you’re buying, and whether the property will cash-flow. Find comps on Zillow or Realtor.com, or ask agents and appraisers. Learn rehab costs by talking to contractors and other investors. Then check cash flow with what he calls “the napkin method.” Jot down five numbers on a napkin: rent, mortgage, taxes, insurance, and property management fees. The more deals you run, the better you get. Repetition builds mastery.
You also need people. In any new area, his first job is finding his “Core Four”: an agent, a lender, a contractor, and a property manager. A rockstar agent knows everybody and finds deals before anyone else. A rockstar lender won’t say no without offering another way. A great contractor may not answer your calls right away, but knows how to do the job and save you money. A great property manager already runs lots of rentals in your area and knows the best repair crews.
How do you get people that good to work with you? Become someone worth working with. Learn how their business works, then find what they need and bring it to them. Even a great online review, or a call to their boss to praise them, goes a long way.
When you find a deal, make your offer strong. Cash offers win because they don’t depend on a loan or an appraisal. The author makes his even stronger. He shortens his inspection time and plans to close in ten days, with few or no conditions.
Paying cash takes discipline, and it starts with how you see money. Most people see it as something to earn and then spend, so a budget feels unfair. Greene sees money as a seed. You plant seeds to grow more seeds. The purpose of earning money is to invest it, and spending it just eats into your future.
Chapter 3 — How to Find Deals
Zig Ziglar said, “You can get everything in life you want if you will just help enough other people get what they want.” Finding deals runs on that same idea.
Start by breaking big tasks down. Keep asking yourself, “What’s my most important next step?” Then “find a great agent” becomes smaller steps: search Zillow for top agents with teams, email the team leader, and set up interviews. And don’t stop at one agent. Some hear about deals from investors before they hit the market. Others know attorneys who handle divorces and estates. The more people you know, the more deals you’ll find.
Wholesalers, who lock up cheap deals and pass them on to buyers, can bring you great properties. But they aren’t licensed, and they don’t have to look out for you. The biggest risk is bad information, or sometimes a flat-out lie.
There are other ways, too. Send direct mail saying you’ll buy houses in any condition, and keep sending it, since one wave rarely works. Network with people who meet distressed sellers often, like divorce and probate attorneys and funeral homes. Foreclosure auctions can offer great deals, but most are cash only, with little or no chance to inspect. With tax liens, you pay an owner’s unpaid property taxes and earn the right to take the house, though in some places the owner can pay you back and keep it.
Or go driving for dollars. Look for homes that are clearly neglected, with overgrown lawns, newspapers piling up in the driveway, or boarded-up windows. A letter in the mail can annoy people, but one delivered by hand puts a face to your name and shows you’re serious.
Chapter 4 — Rehabbing Like a Pro
If buying right is the most important part of making money in real estate, getting the rehab right is second. It starts with good people. Skimp on finding them, and you’ll pay for it later with shoddy work and a terrible experience. To make the search easier, look for team members who invest themselves. And be likable. In a lot of ways that matters more than being smart or experienced. Likability makes everything easier.
You’ll choose between contractors, who are licensed, and handymen, who aren’t. A handyman can save you a lot of money. But when Greene hires one to put in floors, he asks whether they planned for late materials, workers not showing up, and dump fees. Often they didn’t. If you hire a handyman, you’re the general contractor. You can’t expect them to do the work and manage it too.
With contractors, ask for an itemized bid that lists every expense. It should read like a menu, where you can add items, drop them, and keep what’s good value. To see if you’re overpaying, ask what the materials cost and how many hours the labor takes. Then check with a second contractor. It’s always smart to get more than one bid.
The bid also needs a timeline, and the author lets the contractor set it. Say a contractor named Carl says eight weeks. The author asks, “Are you positive you can do eight weeks? It’s okay if you take longer, I just need to know up front so I can plan around it.” Carl says nine, to be safe. Then comes the twist: “Okay, Carl, I’m actually going to give you ten weeks.” If Carl finishes in ten, he gets a bonus of 5 percent of the job’s cost. If he goes over, 5 percent comes off, plus another 5 percent for every extra week. Carl is usually thrilled, and the penalty keeps him honest. Both of them sign it into the contract.
With the team in place, you can start “upgrade hacking,” which means making a property worth more for less money than it would normally cost. Start with where not to spend. Hardwood floors, granite countertops, and fancy cabinets are usually a mistake. They’re easy to damage, and they cover a lot of space, so you have to buy a lot of them.
Bathrooms are the exception. Tile holds up, and bathrooms are small, so nicer finishes don’t cost much. That’s why they give you so much bang for your buck. If the old shower is already torn out, you can add a rainfall showerhead for under $400. If the vanity needs replacing anyway, a couple hundred dollars more gets you a granite top and a better faucet. Kitchens give you the most bang for your buck of all. If the appliances have to go anyway, swap in stainless steel instead of white.
Outside, pick things that won’t need replacing. Concrete costs more than grass, but it’s hard to ruin, and tenants won’t care for a lawn the way you would. Mulch is cheap to refresh between tenants. And when old carpet needs replacing, put in tough laminate. Carpet is cheaper up front, but you’ll be replacing it with nearly every tenant.
Chapter 5 — Common Rehab Strategies
One of the best ways to add value is to add square footage, especially when a house is smaller than its neighbors. Look for parts of an addition that are already in place. A new master bedroom might cost $30,000. But if there’s already a concrete patio with a roof over it, or plumbing close by, you can often turn it into living space for much less.
You can also add bedrooms and bathrooms. The biggest jump in value is from two bedrooms to three, because more people want three. Turn a space that isn’t doing much into a bedroom with some drywall, a closet, and maybe French doors. A second bathroom in a one-bathroom house works the same way and makes it much easier to rent.
Skip the fancy crown molding and the showpiece fireplace. Appraisers and renters both care most about the kitchen and bathrooms. In the kitchen, paint the cabinets instead of replacing them. Go very dark, or white and light gray, and avoid the old brown oak look. Find a tile you like and use it on every job, the way experienced investors do. In the bathroom, tile the shower but skip the glass door. It’s expensive, it breaks, and it gets moldy because tenants often won’t clean it.
For landscaping, use cheap labor for as much as you can and skilled labor only for what’s left. Have a crew clear out the weeds and broken concrete. If there’s a narrow side yard nobody uses, put up a cheap chain link fence, and now you can advertise a dog run. For floors, use tile in kitchens and bathrooms, laminate everywhere else, and carpet in bedrooms only if it’s still in good shape. Add ceiling fans only where a light is already wired in.
The author actually loves replacing roofs. He’s paying cash anyway, so he just budgets it into the bid, and in some areas a new roof lowers the insurance bill. If a roof needs replacing, do it before you refinance, so you get that money back for the next property.
Protect yourself while the work goes on. If you don’t know your property manager well yet, pay them to check on the contractor and send you photos and video. It gives you a more experienced eye and lets the contractor know someone’s watching. And never pay for a whole project up front. A contractor could skip town or quit halfway. Pay in 25 percent draws instead, and have someone confirm the work is done before each new payment.
The first time you use a contractor, consider buying the materials yourself. Have them place the order, then call the store and pay for it. They can’t overcharge you or walk off with the money, and you might catch a sale.
Chapter 6 — Understanding Rent Prices
Once the rehab is done, it’s time to rent, and you need to know what the property will bring in. Rentometer is a good first step. It looks at rentals nearby and gives you a quick estimate. You want the average rent to be near 1 percent of the price and close to the median rent. A big gap between the two can point to a problem. The BiggerPockets website also has calculators that run the numbers for you, even for BRRRR. But the best way to get accurate rents is to ask property managers.
Look beyond the house, too. Jobs drive home values. When wages rise, home prices tend to follow. Towns built on one industry, like oil or car plants, can crash if that industry does. People also choose where to live based on schools, crime, and how close they are to parks and shopping.
Then watch how fast rentals fill. If homes rent within seven to ten days, a bare-bones rehab will do. If it takes more than 30 days, a bigger rehab may help yours stand out. Construction cranes downtown and new homes going up are good signs that housing is in short supply.
Chapter 7 — Tenant Tips
The two biggest expenses that hurt your bottom line are repairs and vacancy. What keeps a rental full is the same thing that sets a home’s price: how many people want it. So buy where demand stays steady. Hospitals are a great example. Traveling hospital staff know they’ll leave in a few months or years, so they rent, and they want to live as close to work as they can. Homes near the best schools also tend to rise in value the most.
Treat good tenants well. If a tenant keeps the lawn looking great, have your property manager raise their rent $50 at renewal instead of the usual $100. And time your leases. If someone moves in during the winter, give them a 15- or 16-month lease so it ends in spring, when more people are looking. That one move can save you thousands in vacancy over time.
When you interview property managers, look for blunt honesty and pickiness about which clients they take. Look for specific answers about how problems get handled, real systems, a proactive approach, and deep local knowledge.
And be clear with them. Most frustration comes from expectations that were never said out loud. Maybe you’re too shy or too busy. Maybe you think it’s common sense, or you’re afraid of conflict. Whatever the reason, if you don’t communicate your expectations, you have no one to blame but yourself when things go badly.
Chapter 8 — Choosing Your Lender
The refinance is the step that gets your money back, and it starts with the right lender. Before you buy, ask the big questions. How much can you borrow, and at what rate? How long is the “seasoning” period, the time you have to own the property before you can borrow against it? How much of the value will they lend? What will the closing costs be? And what’s their rate for a cash-out refinance? They may assume you’re buying a house, not refinancing one you already own.
Get pre-approved with two lenders. Rates and fees change, and some lenders, like some online ones with great rates, cave the moment something goes wrong. If your loan falls apart, you want a backup ready. And a lender who knows you’re comparing will work harder for you.
Ask about seasoning right away. You don’t want to plan on borrowing two months after the rehab, then learn you have to wait six. Ask about the loan to value, too. The best lenders go up to 75 or 80 percent. The higher it is, the more money you get back for the next deal.
Get specifics on closing costs. Some lenders bury their fees or quote you only one of them. Ask for a “net sheet” that lists every cost, and compare. If a lender offers to “buy down” your rate, meaning you pay more now for a lower rate, figure out how long it takes to earn that money back.
Finally, think like the bank. If it’s short on cash, lending to you means it can’t lend that money to someone else. So offer to keep money on deposit there. It builds the relationship and gives them more to lend. When they’re choosing between borrowers, yours becomes the loan that’s hard to turn down.
Chapter 9 — The Value in Financing
Some lenders lend against a property’s value. Others lend against what you spent on it, which is called loan to cost. Ask which one right away. A lender that lends against cost is telling you that you’ll never pull out all your money, let alone more. Unless their percentage is really high, like 95 percent, Greene avoids them.
Most investors start with conventional loans. For a rental, expect to put at least 20 percent down and pay a higher rate than on a home you live in. You can only have ten financed properties on conventional loans. To grow past that, build relationships with banks that offer portfolio loans, which they keep instead of selling off. Hard money loans are expensive, short-term loans that bridge you into a property before you refinance. With owner financing, the seller acts as the bank. And a HELOC, or home equity line of credit, lets you borrow cheaply against the equity in a property you already own.
There’s also a very underrated way to live almost for free. Buy a home with a low down payment loan, like an FHA or VA loan, and rent out the spare rooms. Or buy a two- to four-unit property, live in one unit, and rent out the rest. Done right, the rent can cover your whole mortgage, or more.
Why real estate at all? Every investment has risk. But real estate gives you more ways to make money than to lose it, and more control over how it turns out. It also rises with inflation, like a buoy on the tide. As prices go up, home values and rents go up with them.
In BRRRR, the refinance is your exit. You don’t sell, but you get your money back, and that’s the real reason anyone exits an investment. It also saves you taxes and commissions. You only pay capital gains tax when you sell, and you skip the closing costs too. Refinances aren’t taxed at all. Some investors think a 1031 exchange, where you sell and roll the money into another property, lets them skip the tax. It only delays it, and its strict rules make it harder than it sounds.
And while you hold, you make money in many ways at once. You earn cash flow, which gets tax breaks like depreciation. Rents rise each year. Your tenants pay down your loan every month. The property rises in value, with inflation doing most of the work. Your rehab forced the value up. And you bought right in the first place. Through all of it, you only pay tax on the cash flow, at a lower rate, and when you sell.
Chapter 10 — Building Systems to Increase Your Success
The last R is Repeat, and repeating takes systems. The book builds them around four E’s, each with questions to ask yourself. Efficiency: How can you cut steps so fewer things go wrong? Effectiveness: What did you do well in the past that you can repeat today? Expeditiousness, which just means speed: Where are you slowing yourself down with work that doesn’t matter? And employability: What are you doing that someone else could do better?
The answers usually point to the same truth. You wear 20 percent of your clothes 80 percent of the time. You use 20 percent of your apps 80 percent of the time. In real estate investing, 20 percent of your actions will produce 80 percent of your results. Find that 20 percent and stick to it.
On every episode of the BiggerPockets Podcast, the hosts ask guests what sets successful investors apart from those who give up. Most give some version of the same answer: persistence. The beginning is always hard, and it takes persistence to get through the learning phase to the good stuff. The value isn’t in the first time you do something. It’s in the tenth. So the first few times, don’t aim to excel. Aim to learn. Your failures, read the right way, show you how to improve your systems next time.
Guard your time along the way. Even people who don’t ask for money will ask for your time and energy. Those are limited too, and they’re worth protecting as much as your cash.
Chapter 11 — Scaling Your System for Increased Success
A strong system grows through the people in it. The book offers sample letters for each kind of partner, and they follow the same pattern: show you understand their business, and offer something back. To a lender, you might write, “I know as a lender you often put in massive time on a file that for various reasons beyond your control does not close.” Then ask them to send you any great deal that falls through, and promise them the loan. Ask property managers to tell you first when a client wants to sell, and promise to keep the property with them.
Most people understand compound interest. Try applying it to people. Big growth doesn’t come from repeating the same act. It comes from turning each opportunity into more opportunities, then turning those into more.
Systems also let you increase your volume, and volume gives you leverage. Using the same contractor again and again is one of the best ways to save money, since the rehab is often your biggest expense. They’ll learn how you want bids and how fast you pay. Once you’re bringing them steady work, it’s fair to ask them to trim their profit. Property managers work the same way. Once Greene has three or four properties with one manager, he asks for a 1 percent cut in their fee. At six or seven, he asks for 2 percent. At ten or more, 3 percent.
Agents are different. Don’t ask them to cut their commission, which can send their best deals to someone else. Use your volume to ask to see the best deals first. That will make you far more money in the long run.
Chapter 12 — Arguments Against BRRRR
BRRRR has its critics, and the book answers them one by one. Some say having more equity in a property is safer. But with BRRRR you still have equity. It’s just equity you created, not cash you put down. And losing equity only matters if you have to sell. If the property cash-flows and you keep money in reserve, you can ride out any storm.
Some say BRRRR takes too long to start. But think back to Tom and Mike. Mike may have started later, but he made far more in the long run. And you don’t need your own cash. You can partner with someone who has money, use a hard money loan and refinance later, take out a HELOC on another rental, or use seller financing.
Some say it’s riskier because you put more money in up front. Look at the whole process, though, and it’s far less risky. By the end, you have much less money left in the deal, which raises your return and lowers your risk at the same time.
Some say it only works with a huge rehab, or only for cash buyers. Neither is true. Greene has used BRRRR on deals from wholesalers that needed only a good cleaning and some paint. He’s also teamed up with groups of investors to buy apartment complexes with a bank loan, used the rehab to raise the value, and then borrowed against it again.
Some worry the appraisal will come in low. If it does, you can challenge it with your comps, pay for a new appraisal, or sell and count on the buyer’s appraisal coming in higher. Even then, BRRRR is still more efficient than the traditional way.
And some just find big remodels intimidating. That’s exactly the point. A rehab is one of the simplest ways to add value, precisely because nobody wants to do one. If everyone were willing to do rehabs, there’d be no opportunity left. People looking for a home would snap up every cheap house. The opportunity exists because rehabs scare people off.
Chapter 13 — How You Should Expect BRRRR to Improve Your Results
The biggest change BRRRR brings may be in how you think. When you know you’ll get your money back after each purchase, you stop worrying about missing the next deal. You can buy here and buy there, because you’ll have the cash for both. That freedom is a powerful push to keep making progress and taking action.
That’s what the whole method comes back to. Buy under value. Add value with a smart rehab. Rent it so it pays its own way. Refinance to get your money back. Then do it again with the same dollars, a little faster each time. It’s a small change in order, but small hinges swing big doors. Don’t sacrifice your future by not taking action today.