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The BRRRR method seems, at first glance, to be a loud declaration of chilliness. But no, it’s not about being cold or needing an extra sweater.

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It’s a type of real estate investment that helps you grow your investment and purchasing power over time, through a cycle of buying, improving, and renting out property to generate passive income.

This article will show you the BRRRR method in action, walk through each step in the cycle, and reveal ways to make the process easier if you’re new to this style of investment. Let’s jump in.

The BRRRR Cycle, Explained

An example: Sally buys a property in Dallas that’s in need of a little TLC. She purchases the home for $150,000 with a 20% downpayment of $30,000, then gets a loan for the additional $120,000.

Next, she applies $40,000 of renovations to the property, hoping that these upgrades will double the value of the original purchase.

After renovations are complete, Sally has her property re-appraised at $300,000 (Well done, Sally!) and is able to rent it out for $2,500 a month. After a couple of years of collecting passive income on the property, Sally is ready to repeat the process.

She takes out another loan for $200,000 (a fraction of the value of her current property), uses it to pay off the original loan of $120,000, and begins the process again with a start-up fund of $80,000 PLUS her ongoing passive rental income.

Of course, Sally’s experience is the simplest version available. The actual application of the BRRRR method requires a bit more elbow grease.

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