Why Does the BRRRR Method Work?

No, it’s not the sound of a power drill — but the BRRRR Method sure is a powerful tool in the right hands.

The BRRRR Method is an established way of building wealth through real estate investing. But what is it, and why does the BRRRR Method work?

Here’s everything you need to know about the BRRRR method and how it works.

What is the BRRRR Method?

The BRRRR Method in real estate is an investing strategy that you can use to purchase and leverage properties. The goal of the BRRRR Method is to create equity in a property so that it can be refinanced and the cash used to purchase another investment property.

The method consists of the following stages, following the acronym:

  • B – Buy a property below market value
  • R – Rehab the property, increasing its value
  • R – Rent the property out to tenants
  • R – Refinance the property to access the equity
  • R – Repeat the process

Why Buying and Rehabbing Works

The first two stages of BRRRR – buying and rehabbing – work together to create equity in a property. By finding a property that is undervalued and then making renovations to increase its value, you can create a property that is worth more than what you paid for it.

This makes the property a key financial asset, but you’ll need to put money into renovations — so how does that work out? The key lies in what you do with it next.

Why Renting and Refinancing Works

The next two stages of BRRRR – renting and refinancing – work together to generate income and access the equity you’ve created. By renting out the property, you can generate income to cover the mortgage payments and other expenses, plus create a stable cash flow.

That makes the home an income-producing asset, which can then be refinanced to get the cash you need to buy another property — and repeat the process all over again. The advantages of the BRRRR Method become clear at this stage, as the ability to “bootstrap” toward a large and profitable portfolio becomes obvious.

Putting It Together

Real estate investing with the BRRRR Method is an effective way to take advantage of the power of leverage.

By refinancing a property and using the equity to purchase another property, you can essentially buy properties above and beyond your typical buying power.

Over time, this can compound to create a large portfolio of income-producing properties that can generate a significant amount of passive income.

Plus, because the goal is to buy properties below market value, the BRRRR Method can help you create a margin of safety against potential market downturns. With real estate on your side, the world is your oyster for other money-making opportunities.

Why does the BRRRR Method Work? Mystery Solved!

If you’ve sat there scratching your head, wondering “why does the BRRRR Method work?” then we hope we’ve solved the mystery. With BRRRR, you can gain a foothold at below-market rates, add value, and create equity that can be used to purchase another investment property.

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