BRRRR Real Estate Strategy
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BRRRR Real Estate Strategy


What is the BRRRR method
for real estate investing? That’s B-R-R-R-R. 4 Rs. Let’s dive into it. Hey everybody, I’m
Clayton Morris, back with another video
here where we’re talking about real estate investing. The whole purpose
of this channel is to help you build
passive income. We specifically talk about
buy and hold investing. I’m the president
of Morris Invest. I’m a longtime real
estate investor. And one of the
ways that I’ve been able to explode my
rental portfolio is by using the BRRRR method. This term has become popular
over the past few years, the B-R-R-R-R method. 4 Rs. So what exactly
does it stand for? It means Buy, Repair, Rent,
Refinance, and then Repeat. So Buy, Repair, Rent,
Refinance, and Repeat. I like to call it
rinse and repeat. once you go through this
process, rinse and repeat. So buying the property. Now the key to all of this-
and we’re going to walk through a couple of key steps here on
how you can really maximize the BRRRR method– the bottom line is
you’re not paying market value for the house. You’re not just
calling up a realtor and finding out, oh,
the house is worth $100,000, let me pay $100,000,
and then with closing costs. I’m paying $101,000
for this house. No, no, no, no, no. We want to find
properties where we can add value, where we can
also buy below market value, and then when the banks
look at us for a refinance, they’re impressed with
us because, wow, you’ve just added to your net worth. You found a house that
was below market value, you added some value
to it by repairing it, and now it’s worth more
than what you bought it for. Of course. And then, of
course, it’s rented, so they’re going to look
at that property and say, of course we’ll give you
money on a refinance, and you can go and repeat
and buy another property. So that’s the value
of the BRRRR method. All right, let’s start with
the first step in this process, which is to buy the property. And so step one is to buy. Are you just calling
up a realtor, paying over market value? No. So most people will
talk to you and say that the value of
your rental property, the success that you have in
any investment, is on the buy. Even if you’re buying
stocks, buy low, sell high. So that’s what you want
to do with real estate. Buy low and hold it for
the rest of your life, but you’re building up
equity in order to leverage that equity to buy
more rental properties. So on the first property
you really want to make sure you’re buying it
below market value. A lot of the properties I buy
are well below market value so that I’m able to add I’m
able to add value to the house by rehabbing the house. So buying the property
well below market value could be 10%,
could be 20% below. It just really depends on the
amount of rehab on the house. So if you buy at 20%
below market value and it doesn’t need
much work, maybe paint, carpet, dry
wall touch up, great. Then you’re probably not
going to spend that much money to get this house rehabbed
and ready for rent. Now you own a property for 20%
less than the market value. That means you paid 80%
right of the market value. And you’ve now added value to
this house by paint, carpet, and you’ve got it
rented, and you’re still coming out ahead of the game. So even in a
worst-case scenario, if you need to
sell that property you could sell it for
90% of market value if you had to suddenly get your
cash back out for some reason. So that’s what I do with
all of my properties. I’m making sure that I’m
buying well below market value, I’m adding value to the
house with the rehab. And then I’m going to
cash out, refinance, either using a home
equity line of credit strategy or some
other great strategy that we talk about
here on the channel. So on the buy, want to
make sure you buy first and buy smart with
your rental property. Also remember if you’re
paying less for the house, then the refinance will enable
you to get more money out of the property. So if you pay 80% of the market
value, then your refinance, the bank may give you 80%
loan to value of the house means that basically
all the money you just put into that house,
you’re basically going to get all of it back
so you can go and purchase another property. That’s why we want to
buy below market value. Because if you paid market
value for that $100,000 house and the bank is only going to
give you 80% loan to value, then you’re only going to
get $80,000 back out if you paid above market value. So don’t pay above market
value for the house. All right, let’s talk
about the repairs. So the first step is
to buy, then to repair. What do we want to do in this
property to have it repaired? Repairing a rental
property is a tricky game. You do not want to spend
more money than you need to on the repair of a property. Now if you’re
flipping houses, which we don’t talk about that
here on the channel, that’s not what we do. We don’t flip houses. But if you’re flipping
houses, then of course you want to spend money on the
granite countertops and all the lavish finishes. On a rental property, beware. You do not want to do that. You do not want to
over-upgrade and over-repair your rental property. Think about it. The longer the
amount of time it’s taking you to rehab
that property, cash flow is not coming in. You are not making
money because you do not have a tenant in the property. So very often people, when
they’re first starting out, think that they want
the house to look like the house they live in with
their kids and their family. No, no, no, no, no. Why are you going
to waste money? If you have a tenant that
is ready to move in today, why are you futzing
around about the way in which paint was taped on
the bottom of a baseboard? Oh, we need to touch up
that paint a little bit. It’s a little bit
misaligned with the tape around the baseboard. Are you crazy? No. Make sure the house
is a rock-solid place, and you want to spend your
money on your repairs in the key areas– your roof, your windows,
furnace, water heater, electric, plumbing. Those are your main components
and main mechanicals of your house. Once you take care of
those, those systems are going to last
you many, many years. Paint, dry wall,
carpet, those things can be replaced very quickly. Don’t sweat the small stuff. So on your repairs, make
sure that you’re not overspending on your rehab. So the second step of the
BRRRR method is repair, but you’ve got to be careful. Don’t go crazy and
don’t spend more than you need to get that
property cash flowing. You’d be crazy to do that. The third step in
this is to refinance. Now that you’ve got the house
rehabbed, and it’s rented, now you can approach
a local bank. I would suggest
using a local bank if this is a strategy
that you want to employ. Local banks are way
easier to work with. So stay away from those larger
institutional banks like Wells Fargo and Bank of America. They can be great
for other things, but for these local
refinances I’m telling you, I’ve had experience with this. The local banks are always
better to work with. And look, they’re competing
against the big guys, so very often they’re going to
have great introductory rates for you in order to
refinance, whether it’s doing a home equity
line of credit, pulling your money back out as
a home equity line of credit to buy other properties,
great, or actually cash-out refinancing the property. The point is you want to make
contact with your local banks, talk about their investment,
talk about the property, and let them know what
your goals are in order to pull that money back out of
that property on a refinance. Because you want
to use that money. Sometimes it’s going to be
75% of the value of the house, sometimes there’s going to be
80% of the value of the house, and then you’ll be
able to roll that money into your next purchase. All right, we talking
about the buying. We talked about the rehabbing. We talked about getting it
rented as quickly as possible with a property management
team or yourself, of course. And we talked about
the refinance process in the BRRRR method. And the last step in the BRRRR
method is to get it repeated. The whole point is not
to just buy one property. The BRRRR method allows
you to rinse and repeat. So get out there,
pull that money back out, and now that
you’ve identified an area, targeted area, market where
you’re looking to invest, go out there and take that
strategy to the next step and buy your second and
third rental properties. The point is that you want
to keep robbing Peter to pay Paul with this strategy. Once you get this
one up and running, refinance it, pull the
money right back out of it, and roll it into
your next property. Let me tell you a quick little
story of a friend of mine. His name is Abe. He lives in New Jersey. He owns many, many rental
properties in the area locally here. He started with
just one property. And over lunch he described
to me how he did it. He didn’t have very much money. He had enough to
do one property. He was able to do
the down payment, he was able to get
it rehabbed, he bought at below market
value, and he got it rented. What did he do next? He refinanced. He pulled that money back out. Now that he added
value to that house he was able to almost get twice
as much money as he put in. Guess what he did with it? He bought two properties next. And then he was able
to pull that money out and he was able to buy four. And on and on and on, he
was able to go down the line and buy more and
more properties. So now he owns close
to 2,000 properties. He’s a multimillionaire. He has a whole office staff. And it’s remarkable. The guy is amazing. So and he did that, and he
started about eight years ago. It’s a cautionary tale, right? It’s amazing. That’s what you can accomplish
by using this strategy. That’s what we’re doing, that’s
what many of our investors that we work with do as
well, the BRRRR strategy. So that’s the BRRRR
strategy in a nutshell. We have many other great
videos here on the web site, on the YouTube
channel, so just click on different playlists here. Different strategies to help
you identify the neighborhoods where you can find
your rental properties, or if you don’t want
to do it yourself we have a whole series
of playlist videos on how to buy turnkey
rental properties as well. Whatever you do, I
want you to go out there and take action and
become a real estate investor. Oh, and by the way, please
subscribe to my channel, if you haven’t
already done that. We publish videos every week. I’m Clayton Morris. We’ll see you back here
next time, everyone.

60 Comments

  • Bk All day

    would you consider not being able to pull the money out because the equity is at 20% so the bank won't allow a cash out but another bank will do a HELOC to be a BRRRR

  • Jaime Lopez

    Hi Clayton, i understand the concept of the Brrrr method, but i have a question regarding the refinance aspect of pulling out cash. Suppose you have a house in which you rent for $1000 (after repair value), then you pay PITI along with property mgmt. $700 which leaves you $300 positive cash flow. Afterwards you refinance the house and pull out the equity for the purchase of another property. Then the $300 positive cash flow you once had is gone because the house payment is now higher since you pulled out cash. Correct me if i'm wrong, it is possible that you'll either be break even or negative on cash flow on the first house?

  • Teruko Dixon

    Hey Clayton I love your channel. I have a quick question: A few months ago I saw you on a FOX new video speaking about using a HELOC to pay off your home early. Well after a little research I choose a company to teach me the process and in December replaced my traditional mortgage with a HELCO. My HELOC is working even better than expected, so I guess my question is how can I used this to purchase turnkey real estate and practice the BRRRR method. I am seeing incredible results with my HELOC and soon I would ready to purchase my first Turnkey property.

  • Clinton Bolton

    Hi Clayton amazing videos love checking your channel out overtime a new video is posted. got a question. How do you know how much rent you can get from a property? do you look at the property and the neighbourhood and make a rough estimate? or do you ask the local real estate agents what the rental income is, on certain properties? looking forward to hearing your answer. Thank you in advance for your time

  • Handsome Vaughn

    Hey Clayton, I'm DeVaughn. i really enjoyed the video! I'm a hungry new investor ready to try my hand at rental properties and this video just confirmed to me that this is the business for me!!! Do you do mentorship to help build ones portfolio?

  • FacelessHD

    i have an interesting question, am i able to buy a duplex with you guys and i live on one side and rent the other. Its like having you guys help me find a great property and a new home at the same time. in a few years i plan to save up to $50,000 before i look into buying my first home, and i thought the smartest way for me to move out of my parents house is to buy a duplex (turn key real estate)

  • Jason Haglund

    Hi Clayton, great video! Do you have a rule of thumb for the maximum about of debt you carry relative to the net worth of your portfolio and/or how fast you like to pay off HELOC loans?

  • cowslane1

    I thought you couldn't refinance as an LLC. Am I mistaken on that?
    And it's best to own rental property through an LLC. So…. how do you get around that dilemma?

  • computerfastrepair

    thank u so much mr.morris. geezus ur giving bigger pockets some competitiin for wisdom!! Pls make a video on ABE!! wow. if there was any source of motivation besides urself… it should be abe.. i want that goal! and im in englewood nj too!

  • Tony Browns

    Hi Clayton,

    Awesome content you create Clayton. Question: Provided the BRRRR is followed, will the credit union ever check you? What I mean to ask is say you have 5 properties with the BRRR idea, will the (investor friendly) bank give the green light to 500 properties or is there another factor that comes into play that can check the process? i.e. DTI ratio etc

  • Elias palacios

    Hello your friend refinanced and that money reinvirtio back into that property so re finance again and then buy two houses? Or just once refinanced? excellent videos..

  • Juanco_"C.E.O."

    If you have a property refinanced already, will banks keep on refinancing properties for you, is their a limit? Thanks

  • Vittorio IMB

    Clayton, you're the real deal. I'm really happy I just find your blog. I really appreciate all the work you've done and continuing to do so. I'm new to real estate investing with a crazy amount of questions, and all of the sudden you got the answers to most of them. God bless you

  • Jose Lopez

    Can you show us your 'expense sheet' on one of these properties you BRRR?
    I'm curious to know how much is usually spent on the "key areas" and how long it takes to have a tenant in.
    Also, what's your Cash-on-cash return for your average property in percentage?

  • John Basilyous

    What a great video, I truly did learn a lot. But my only concern is, where should I go to find properties that are below market value?

  • Yer Xiong

    Only issue with this is you still have a loan on the first property. How do banks keep loaning you money to keep getting more and more properties? Debt would be too great versus income.

  • Joel Gierbolini

    Great episode, question. When you refinance to take the equity out. If the house is worth 200K(market value) and you bought it for 180K does the bank gives you 20K in this particular situation?

  • Oh hi Mark

    Would it be easy to refinance a turn key property bought from you? As opposed to one that you found yourself under market value and rehabbed

  • Greg Hatcher

    My overall question is: where do you initially get the money to start the brrrr cycle? Hard money lending or a certain type of loan ( without house hacking)?

  • computerfastrepair

    Morris Invest how r u supposed to get a loan from banks if houses appreciate at 40-50k. no banks or small locals will give you 70%-80% LTV for houses that are not worth or over 80-100k. Please help !!!

  • Diedra Smith

    Hi Clayton,

    Is your personal credit used when trying to do this strategy? I have a low credit score and wondering if that will disqualify me for a refinance. Thank you and your wife for your knowledge, it is greatly appreciated!

  • lewisHelps

    This is a great strategy for real estate investors to use in order to obtain rental properties. I have an example of one that i did on my channel, thank you for sharing this very effective strategy.

  • Dave G

    Well I'm back after a major sidetrack looking into multi family. Maybe later….Would it be better to have an appraisal done immediately after the rehab before the tenants move in so it's fresh and new? Second question when it is time to refinance with the bank will they use the income from the property to balance out my personal debt to income ratio or will they require my income and reserves to be high enough to cover a vacancy? Thanks Clayton and Natali! Btw thanks for your book on how to payoff your mortgage were doing it!!!

  • Ed S

    Jared Kushner's grandfather invented this method some 50 years ago,when he came to US as an immigrant and holocaust survivor from Europe with only shirt on his back just to retire with close to 50 000 properties.

  • Nu Mny

    Hey Clayton, I really enjoy your videos. It shows that you were a news anchor. You are captivating. I have one question for you. Is there a limit to how many times you can use the BRRRR strategy? Thanks

  • Elise

    Hi Clayton, new investor here. I will be using a HELOC for my next purchase. Is it possible to BRRR and still cash flow? I will have a mortgage once I refinance correct? Which will effect my bottom line. I'm concerned about my cash flow.

  • Jay Gee

    Hello Clayton so I was wondering, lets say I get a loan from a local bank or lender for 100,000 for a brrrr investment. During the rehab phase when the property is not being rented yet, how will paying the lender work? if there is no cashflow for a few months until the property is tenant ready, how can a lender get paid monthly on lets say a 12 month loan? also 2nd question, Once the 12 month loan is over, how will a refinance be likely to happen? is it best to go with a bank, or are there other options to get approved easier?

  • John Sinclair

    Stellar method. We bought 4 last year using this method. Didn't know it was a system that others used but knew that it worked and we ran with it.

  • A Buck

    Regarding Refi-Cash Out…does the loan after Refi count towards the "10 Mortgage limit" for conventional Freddie and Fanny mortgages or does this look different to the lender?

  • Agustin Jimenez

    Regarding Refi-Cash Out…does the loan after Refi count towards the "10 Mortgage limit" for conventional Freddie and Fanny mortgages or does this look different to the lender?

  • Justin G

    Love what you're both doing . Love when Natalie picks on you 🙂 great team!! thanks for making the dream possible , can't wait to do our first deal through Morris Invest!

  • Jesse Taylor

    Once again, absolutely phenomenal explanation on things. Great to see someone so close to me in NJ succeeding in real estate, where I want to be.

  • Lowell Dizon

    I wish I can implement this strategy! You mentioned in finding a below market property is not by calling a local realtor, so who do I call? Also, the challenge is to find a good contractor for the rehab. We just purchased our first rental and we did shop around for lenders both locally and national, the big banks were able to give us a better rate. What is the time frame before you apply for a refi? Again, thanks for all the great content!

  • Jonathan Creative

    Hi, I was wondering what the point of doing the cash-out refinance is. I get you use it to pay off the previous existing mortgage payments and to cover the money you spent on rehabing the property, but doesn't that mean that you have to pay more interest because the cash-out refinance is going to be a larger value than the previous mortgage?

  • kross keyy

    Sir morris what is the best strategy in your opinion and experience ? Should i do this method and buy a house under market value and pull it out and re invest then i basically have 2 properties paying off 1 mortgage ? So i can pay it off within 5-7 years from the cashflow and then rinse and repeat ? But the second time it will be quicker because then you have 3 properties paying off 1 mortgage then 4 then 5 ect. Is this a good strategy ??? I really want to start investing but i want to do it right

  • Mobile Apps

    If your buying a property in your company name how will you refinance it? Banks I’ve spoken to don’t allow refi or Heloc when its owned by a Corp.

  • Steven Carolus

    Still doesn't make sense. Say you buy a property at 40k, then fix it up and now it's worth 100k. So you refinance and pay the first loan off and left with 60k. So in the end you are refinancing the same property for a higher mortgage to pay every month. Why would you want to do that? I understand to use the extra money to buy another property but your still gonna pay a higher mortgage on the first property every month.

  • Shayne Green

    My first and only home is almost paid off. Is it possible to buy my next property (for a rental investment) with just a standard loan without putting up my current home as collateral?

  • Frank Rodriguez

    Top shelf content as always! With regard to the BRRRR method, at what point do you recommend registering your LLC?

  • Libertas Ca

    Is your income use with this strategy? What I mean is does the HML use your income and when you go to refinance the property, do they use your income?

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