The BRRR Method—short for Buy, Rehab, Rent, Refinance, Repeat—is a real estate investing strategy commonly used by individual investors to acquire rental properties while attempting to recycle capital.
At a high level, the strategy involves purchasing a property below market value, improving it through renovations, stabilizing it with tenants, refinancing the property based on its increased value, and using the extracted capital to acquire the next asset.
The appeal of the BRRR method lies in its focus on capital efficiency rather than simple buy-and-hold ownership.
Why the BRRR Method Exists
The BRRR method emerged largely in response to capital constraints faced by individual investors.
Rather than tying up large amounts of equity in a single property, the strategy aims to recover invested capital through refinancing once value has been created. This allows an investor to scale a portfolio faster than relying solely on savings or new equity contributions.
In theory, successful execution reduces the amount of long-term capital left in each deal.
How the BRRR Method Works in Practice
The process generally follows five steps:
The investor purchases a property, often distressed or undervalued, using cash or short-term financing. Renovations are then completed to improve condition, functionality, and marketability. Once the property is rented and generating income, the investor refinances with long-term debt based on the new value. The proceeds from that refinance are used to recover capital and fund the next acquisition.
Execution is critical. Delays in renovations, cost overruns, lease-up challenges, or changes in lending conditions can materially impact outcomes.
Limitations of the BRRR Method
While widely discussed, the BRRR method carries meaningful risks.
Refinancing assumptions depend on interest rates, lender underwriting standards, and stabilized income. Appraised values may not align with projections, and loan proceeds may fall short of expectations. Renovation costs are often underestimated, particularly in older properties.
Additionally, repeated refinancing increases leverage and exposure to debt service obligations, which can become problematic in changing market conditions.
The strategy also relies heavily on favorable credit markets. When liquidity tightens, the “repeat” portion of BRRR becomes significantly harder to execute.
Institutional Perspective on BRRR
At an institutional level, the BRRR method resembles value-add investing, but with key differences.
Institutions typically evaluate projects across portfolios rather than individual properties. Capital is structured with longer time horizons, diversified risk, and predefined exit strategies. Refinancing is treated as one potential outcome, not a requirement for success.
In development-focused strategies, value creation often occurs well before stabilization through entitlement, infrastructure, and execution milestones. Capital recycling is driven by portfolio-level decisions rather than deal-by-deal refinancing.
Final Thought
The BRRR method is best understood as a tactical approach, not a universal strategy.
It can be effective under the right conditions, but it depends heavily on execution, market timing, and access to credit. Long-term investment performance is ultimately driven by disciplined underwriting, risk management, and the ability to operate through cycles.
