By Larry Goins
Larry Goins on the BRRRR strategy and Filthy Riches…
Not too long ago, founder of Realty411 Magazine, Linda Pliagas and I were hanging out with some fellow investors in Texas. If you know Linda, she has a fantastic personality, is a serious magazine editor, and is great at bringing people together. She also actively invests in real estate herself. She mentioned that she was just getting ready to refinance some of the free and clear rental properties she had purchased for cash. I’m like “oh, you’re are doing the BRRRR method.” She hadn’t related the term to what she was doing, but it is a popular model being thrown around on the online forum BiggerPockets.
So, what’s BRRRR? How does it work? Is it the best solution for investors?
What is BRRRR in Real Estate Investing?
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat.
This is a cash and cash flow real estate strategy. Investors will purchase properties for cash, or use short-term, hard money type loans to purchase property. Then dig into repairs and improvements to add value and get them rent ready. Then once that property is in shape and performing, investors attempt to refinance to get cash out and/or get better long-term financing terms, which create more cash flow. The cash extracted can be used to acquire another rental property, while keeping the previous one as a rental.
An example scenario may look something like this:
ARV: $100,000
Purchase price: $50,000
Rehab costs: $10,000
Refinance: $75,000
Ongoing rental income: $800 per month, gross, before debt service and expenses.
The Pros & Cons of BRRRR
This strategy has both advantages and disadvantages.
The Pros:
- Can be a way to gradually scale your rental property portfolio.
- Acting as a cash buyer to acquire houses fast and at good prices.
- Achieving lump sums of cash and cash flow.
The Cons:
- Slow approach to cash and wealth building.
- Long term debt, and skimming equity can leave investors in tight spots.
- Lots of equity tied up.
- Headaches and risk of rehabbing and renters.
- Reliance on refinancing.
The reliance on being able to refinance has been a risky stumbling block for many trying to use this strategy. Some have tapped out credit cards or home equity loans, and have been unable to complete renovations to a stage where they can rent or resale properties. Others haven’t been able to find lenders who will give them cash out loans. There is never a guarantee that refinancing will be possible down the road. There are just too many variables, from personal credit and paperwork requirements, to construction challenges, and a changing lending landscape.
Filthy Riches: A Simpler Strategy for Profiting from Real Estate
‘Filthy Riches’ is all about making great money, on cheaper houses. There are some similarities in these strategies. For example; the ability to generate both lump sum paydays, and cash flow.
However, the Filthy Riches plan stands out with a few additional advantages, including:
NO loans needed.
NO bank loans needed by buyers to resell your properties.
NO problem finding deals.
NO getting stuck on the next step.
NO taking on wild risks or gambling on the market.
NO fixing up properties.
NO credit checks.
NO financing delays.
NO limits on where you can buy or sell.
NO competition.
With this strategy, you can make more money on a $5,000 house than the average investor makes on a $100,000 house with the BRRRR strategy.
In fact, you can make 141.88% returns, on a $5k house, with no rehabbing, and no tenant hassles. That’s $45,563.06, back on a home bought for just $5,000! You can take those returns in monthly cash flow, lump sum payments, or a combination of both. This system allows for far easier scaling and diversification, which can rapidly put 19 deals under the control of an investor, within about 12 months.
About Me
I’ve been investing in real estate for over 30 years. I bought my first house in 1985. I’ve been a licensed broker, contractor, and lender. I’ve done all types of real estate deals during this time. This is by far one of the simplest and fastest ways to get started and grow your income through real estate. I still use it today. I have students making over $1M with this strategy in 12 states, and from at least 8 countries.
Whether you’ve been struggling to just get started, got stuck on a BRRRR deal, or want to grow your results faster, you can find out more about how this works in a FREE 7 part video series at FilthyRiches.com .
The Bottom Line
BRRRR can work. Many investors are trying it. Yet, many could get going faster, and make far better returns, with less work, and less risk, by using this proven system instead. Check out the free videos, and see exactly how it works, and if it is the right fit for you. You may be very surprised at how much easier this is!
