PDF Summary:Buy, Rehab, Rent, Refinance, Repeat, by David Greene

From moguls like Donald Trump to HGTV house-flippers, countless people have invested in real estate to build their wealth and pursue financial freedom. In Buy, Rehab, Rent, Refinance, Repeat, real estate investor David M. Greene explains how to use the buy, rehab, rent, refinance, repeat (BRRRR) method to develop a portfolio of investment rental properties that produce consistent, passive income. The keys to this approach are finding a property below market value, paying full price for the purchase and home improvements up front, and recouping your investment by refinancing after renovating.

In this guide, we’ll describe Greene’s tips for executing each step of the BRRRR method and compare his strategies to other methods. We’ll also provide additional information and key context for using Greene’s advice effectively.

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Real estate investor Chad Carson lists five common goals and the best strategies for achieving them:

• Get your start in real estate investing. The best strategies for beginners to start making money are BRRRR, live-in-flip (buy a fixer-upper, live there while renovating, and resell at least two years later to capitalize on tax benefits), house hacking (rent out extra rooms or units on your property), and live-in-then-rent (buy a home, live there, then leave and rent it out).

• Start a business, rather than merely making an investment (as you would in stocks). The best strategies for this are house-flipping and becoming a wholesaler.

• Make money without buying property, allowing you to take a more passive approach. The best strategies for this are to become a hard money lender or a discount note investor (someone who buys another person’s debt at a discounted price and earns the difference between the discount and face value).

• Build wealth. The best strategies for this are short-term buy and hold rentals (buy rental properties and sell them after one to five years) and long-term buy-and-hold rentals (accumulate rental properties with no plans of selling).

• Earn passive income. The best strategies for this are syndications (pool your money with others to buy properties or lend to investors) and real estate investment trusts (like a mutual fund that gives you a stake in profitable commercial properties).

Identifying a Good Deal

To identify a good deal, Greene says you have to determine the property’s ARV (after-repair value), the renovation costs, and how much you’ll be able to charge for rent.

First, calculate your ARV and rehab expenses to gauge whether it’s possible to recover your capital when you refinance. As discussed, Greene recommends aiming for a 75% LTV, a loan worth 75% of the property value. With this rate, if your combined purchase and rehab costs are 75% of your ARV, then you’ll recover your entire investment when you refinance.

(Shortform note: It’s possible to secure up to a 95% LTV mortgage, though there are several trade-offs to consider. First, higher LTVs come with higher interest rates, which eat into your cash flow. Second, fewer lenders are willing to offer high LTVs because they are a bigger risk to the lending institution. Third, mortgages above 80% LTV typically require private mortgage insurance, which adds to your monthly property expenses.)

Estimating your ARV depends on the type of property you’re buying:

• Single-family home values are based on the recent sales prices of comps, or comparable properties in the area. To analyze comps, Greene suggests consulting local real estate agents, appraisers, and websites like Zillow and Realtor.com. (Shortform note: Comps should be similar in style, size, condition, age, and bedroom and bathroom count.)
• Multifamily property values are based on their potential profitability through rents. To determine how much you can charge for rent, talk to local professionals (like investors and property managers) and use rent calculators on websites like Rentometer.com and Biggerpockets.com. (Shortform note: To calculate the market value, divide the capitalization rate (cap rate) by the net operating income (NOI). The cap rate is the average of similar properties’ cap rates in the area—and that is the purchase price divided by the NOI. To get the NOI, total future rents and other income and subtract all expenses—including taxes, insurance, maintenance, and property management.)

To estimate a property’s renovation costs, you’ll likely need a contractor to tour the property and provide an estimate. In his own investments, Greene brings a contractor and an inspector to the property at the same time to ensure that the contractor can factor in every major issue the inspector identifies. (Shortform note: Home inspectors can highlight issues a contractor may overlook. Inspectors check a home’s structure, foundation, flooring, roof, insulation, plumbing, electrical system, and HVAC system. For some properties, you may also want to bring in specialists to inspect for mold, water damage, asbestos, termites, radon, and lead paint or piping.)

Second, estimate how much you can charge for rent to calculate whether your property will cash-flow positively, meaning your rental income will more than cover your mortgage and expenses. As a general rule, Greene says that if you can rent the property for at least 1% of the purchase price, you’ll probably have a positive cash flow. (Shortform note: Real estate investment experts warn that single-family homes are riskier rental properties because your entire rental income relies on one tenant or family, so you have no cash flow on that property during vacancies. If it doesn’t look like rental income will produce a positive cash flow, you may still be able to profit by rehabbing the property and selling it as a flip.)

Securing a Good Deal

Once you’ve found a good deal, you may need to compete against other bidders to secure it—and Greene says that an all-cash offer makes your bid more competitive. Cash offers are attractive to sellers because they reduce the contingencies, which allow buyers to pull out of a deal without losing money within a window of time (the contingency period). Fewer contingencies mean greater odds that the deal will close smoothly and quickly.

There are three primary contingencies in every property sale:

1. The loan contingency allows a buyer to withdraw if their loan doesn’t get approved. A cash offer eliminates the need for a loan approval and, thus, this contingency.
2. The appraisal contingency provides time to get an appraisal and allows the buyer to withdraw if the property’s value is below a certain amount. Banks often require an appraisal, but if you’re paying cash, you have the option to waive this contingency.
3. The inspection contingency provides time for a home inspection and allows the buyer to withdraw or renegotiate if the property has significant issues. Regardless of whether you’re paying cash, you can waive this contingency if you already anticipate a major renovation because the house is severely distressed.

(Shortform note: Each contingency is assigned a specific contingency period, during which the home is under contract. For example, a loan contingency may last 30 to 60 days, while an inspection contingency may be just 10 days. If the buyer’s financing isn’t approved or they can’t schedule a home inspection within the given time window, they have to decide whether to request an extension—which postpones the closing date—or move forward with the sale anyway.)

Greene adds that cash offers also open you to more investment opportunities because some extremely distressed properties don’t qualify for financing.

Although Greene stresses the importance of all-cash offers, it doesn’t have to be your cash. Alternative sources of funding include:

• Owner financing—when you give a down payment and the property owner acts as the lender to finance the rest of the sale price.
• Private money—when you borrow from an individual.
• Hard money—when you borrow from a hard-money lender—generally a private individual who approves borrowers based on their collateral rather than their credit scores (these are often short-term loans with high interest rates and fees).
• A business partner

(Shortform note: Cash offers became more common as the pandemic turned the heat up on housing market competition: They accounted for 20% of home sales in 2019, and by 2021 that number jumped to 33%. Many of these offers came from buyers looking to downsize, who were flush with cash after selling larger homes in the hot market. Facing low housing supply and competing offers for tens or hundreds of thousands of dollars above asking price, buyers with cash offers were nearly four times as likely to win bidding wars in late 2020 and early 2021.)

BRRRR Step 2: Rehab

Once you’ve found and bought a great deal, Greene says that executing a cost-effective, value-raising renovation is the second most important aspect of making a profit in the BRRRR method. This involves working with the right contractor and making smart upgrades to the property.

(Shortform note: Many real estate investors consider this to be the riskiest step in BRRRR, especially for rookie investors, since unexpected issues with the property, poor project management, and bad renovation decisions can add tens of thousands of dollars to the budget. As an alternative, buying properties that are already renovated and rented out allows wary investors to bypass two of BRRRR’s biggest potential hazards.)

Finding the Right Contractor

As we mentioned, each member of your Dream Team should have experience working with investors. Greene describes an investor-friendly contractor as one who knows how to find cost-effective solutions to problems (like repairing instead of replacing worn flooring). (Shortform note: When vetting contractors, ask where they’re licensed, how many years’ experience they have, what types of repairs they can and can’t do, what payment method and schedule they require, and how they can guarantee that they’ll meet the required deadlines.)

If you don’t yet have a contractor on your Dream Team, Greene suggests a few strategies for finding one:

• Ask your property manager (PM) to find five new contractors to bid on each project, and pay your PM $50 per bid. This allows you to meet and compare several contractors so you can quickly find the right one for you. (Shortform note: To make it easier to compare bids, ask each contractor to distinguish materials from labor costs in their bids. This also allows you to verify the cost of materials.)
• Network with other real estate investors and find out which contractors they work with. However, they may be reluctant to share this information for fear that your work will pull contractors away from their projects.

(Shortform note: When working with a contractor, your first project will be the riskiest—that’s when you’ll discover the contractor’s working and management style and find out if they can deliver the work quality and timeline they promised. If the contractor finds an issue that they previously overlooked, like outdated plumbing, the repair could derail your budget. Additionally, if the contractor gets other jobs and prioritizes those projects over yours, you’re likely to go over deadline, which delays your rental income and refinance and also increases the risk of people noticing and breaking into your empty property.)

Making Strategic Repairs and Upgrades

As you plan your rehab, Greene writes that you must be strategic about how you approach repairs and upgrades: Maximize the value of the property—to maximize both the appraisal when you refinance and the rents you can charge tenants—but be aware that there is a point of diminishing returns. If you turn your fixer-upper into a five-bedroom, custom-designed home, there will still be a ceiling to the property’s appraisal and rent values based on the neighborhood and other external factors. Consult your PM to find out about comps’ conditions and amenities to ensure that you prioritize upgrades that make your property competitive.

To strike this balance, Greene offers tips for various aspects of your rehab.

• Add only enough square footage to put your property on par with comps (comparable homes in the area). When you do make additions, try to capitalize on existing structural components—for example, build out onto an outdoor patio’s concrete foundation.
• Add bedrooms if the home has fewer than three, but don’t go over four; at that point, the value gains drop off. If you can, turn existing spaces into bedrooms instead of adding onto the home.
• Add a bathroom if the home has only one.
• Prioritize kitchens and bathrooms, both of which factor significantly into appraisals and rent prices. Upgrade these spaces with fresh paint and new cabinetry hardware. Splurge on high-end materials in small quantities, like the tile for bathroom floors and kitchen backsplashes.

Don’t Forget Permits

Major renovations—including additions and certain plumbing and electrical upgrades—require municipal building permits. When planning your rehab budget and timeline, factor in the time and money needed to obtain the necessary permits. The costs, requirements, and waiting periods vary by municipality, but the process can take up to six weeks, with additional fees for expedited permits. In the permitting process, you must draw up plans for your project, submit those plans for approval along with your permit application, and schedule inspections at various stages of the project to ensure the work matches the approved plan and complies with building and safety codes.

Despite the hassle and expense, permits are critical to raising your property value: Any home improvements for which building permits are required but not obtained will be excluded from the home appraisal when you refinance or sell the property. That can completely derail your return on a BRRRR investment.

BRRRR Step 3: Rent

As soon as your property is rehabbed, Greene writes that it’s time to start renting it and creating cash flow. (Shortform note: Finding tenants quickly is also critical because many lenders require you to have renters before refinancing. Delaying this step not only postpones your cash flow but also your ability to recoup your investment.)

Since you don’t have much wiggle room in your rent prices at this stage—they’re largely determined by the property you bought and the success of your rehab—your priorities in this stage are to minimize vacancy and manage your property effectively.

Minimizing Vacancy

Greene states that you can minimize vacancy by strategically setting your rent prices and lease periods and by keeping tenants happy.

As we discussed in Step 1, you should have consulted local investors, PMs, and rent calculators on websites like Rentometer.com and Biggerpockets.com to estimate your rent prices before buying your property. Greene recommends you set rent prices at the lower end of your estimate initially to attract tenants and fill vacancies quickly. Then raise rents to the higher end of that range during lease renewals—at that point, most tenants are willing to pay more to avoid moving.

Additionally, set your lease periods to expire during the spring or summer, when most renters are looking for homes. If your tenants move out, you’ll have more interest from prospective tenants and reduce the “turn time,” how long the unit sits vacant between renters.

Finally, don’t give your tenants reason to leave: Be accessible, responsive, and prompt with maintenance requests. (Shortform note: The implied warranty of habitability requires residential landlords to keep properties in “habitable” conditions throughout the lease period. Although the definition of habitability varies by state and jurisdiction, it broadly includes electricity, heat and hot water, drinkable water, a functional bathroom and toilet, and a smoke detector.)

Greene also suggests rewarding tenants (those who pay on time, maintain landscaping, and keep the property in good condition) by discounting their rent raises during lease renewals. Although you lose some money in the lost rent, these tenants save you money in maintenance costs and city code violations.

Screen Your Tenants

The tenants who will contribute most to your income are those who cause minimal property damage and stay for many years (and rent increases), saving you lost earnings during vacancies and the time and money required to advertise and fill vacancies. Increase your chances of finding a good tenant by screening interested candidates.

• Require references from past landlords and employers. Ask landlords if the renter paid on time and kept their property in good condition. Ask employers if the renter is reliable and verify that they’re still employed.

• Run a credit check to find out if the tenant has filed for bankruptcy or faced prior evictions.

• Ask for current pay stubs to ensure that the renter makes enough to cover rent.

• Complete a background check of local, state, and federal records.

While screening applicants, avoid violating Fair Housing Laws by maintaining consistent screening requirements (ideally posting them with the advertisement for the rental) and steering clear of questions about the renter’s age, sex, race, religion, disability, native language, or familial status.

Managing Your Property

When it comes to managing your property—from responding to maintenance requests to handling lease renewals and evictions—you can do it yourself or hire a property manager (PM). Although Greene recommends having a PM on your Dream Team, you don’t have to use them to manage your property (they can still be a valuable member of your team, for example, by offering advice about the best neighborhoods to buy investment properties).

He lists the pros and cons of each option:

	Property Manager	Self-Management
Pros	Experience and skill set Familiarity with the area	No cost Control over every aspect of management
Cons	Higher cost Time and effort to find a high-quality, compatible PM	Lack of skills and experience Consistent time and effort (that could be better spent finding, buying, and rehabbing new properties)

Greene writes that this choice depends in part on your personality: Some investors may enjoy the work or value the control more than others. However, as you build your portfolio of investment properties, managing them yourself becomes less feasible, and you may reach a tipping point where you have no choice but to hire a PM.

Weigh the Pros and Cons

The pros and cons listed above can be summed up as three key differences:

• Time and effort

• Cost

• Skills and experience (this encompasses knowledge)

While each investor has a different tolerance for the time and effort required to find a property manager or self-manage a property, let’s examine the other differences.

• Cost: Property management costs average 8% to 12% of the rental value, which is the total potential rent the property will bring in when fully occupied. Since this price does not reflect additional PM fees, property expenses, or vacancies, it can take a large chunk out of your cash flow.

• Skills and experience: If you opt for self-management, especially as a new landlord, you’ll need to be aware of your legal responsibilities and liabilities. Get familiar with local landlord and tenant laws to ensure the property meets building codes and that outdoor maintenance (including landscaping and snow removal) complies with the warranty of habitability. Additionally, hire a landlord-tenant attorney to review leases and help you deal with evictions and other tenant issues.

BRRRR Step 4: Refinance

As discussed in Preliminary Step 2, Greene emphasizes that you should have a loan pre-approval letter before beginning the BRRRR process. That pre-approval gives you a baseline for your refinance, but certain conditions like the loan’s interest rate may change. (Shortform note: Another major risk is the real estate market crashing between budgeting your project—based on your pre-approval and estimate of the property’s after-repair value—and getting it appraised for your refinance. If home values tank, you lose a large chunk of your investment. Although crashes can be unpredictable, monitor market trends and try to anticipate dips.)

Your lender should work with you to determine which type of loan product is best for your project. As a primer, Greene describes several types of loans.

Conventional loan: Many lenders offer conventional loans because they’re partially insured by the government, making this a common option for new investors. For investment properties, this loan typically requires a 20-25% minimum down payment.

(Shortform note: As previously mentioned, if your down payment is less than 20%, you’ll typically have to pay private mortgage insurance (PMI) until you have 20% equity in your home. The annual cost of PMI is based on the size of your loan and your credit score, averaging between 0.58% and 1.86% of your loan. Although this is an added expense, it can make home ownership accessible to buyers who couldn’t otherwise afford a 20% down payment.)

Jumbo (or high-balance) loan: This is a loan that exceeds the regional housing market’s designated borrowing limit. As a result, they tend to carry high interest rates and lender fees. However, these loans are uncommon for real estate investors who aim to buy low- and mid-level properties.

(Shortform note: Although Greene equates high-balance and jumbo loans, high-balance loans are conforming loans, while jumbo loans are nonconforming. A conforming loan meets the criteria for Fannie Mae and Freddie Mac to back the mortgage, which gives the lenders a safety net and leads to lower interest rates. Since nonconforming loans don’t meet these criteria, lenders take on more risk and have more flexibility to set the terms and requirements, which typically means higher interest rates and minimum down payments.)

Home Equity Line of Credit (HELOC): This is a loan against your equity in a property. It acts as a credit line, and it often has lower interest rates than credit cards.

(Shortform note: One benefit of using a HELOC is that you avoid the closing costs required for most refinances. These closing costs average 2 to 5% of the loan amount.)

Portfolio loan: This is a loan that the lender or bank (often a credit union or savings and loan association) holds in its portfolio, rather than selling it to a secondary buyer. Although these loans have higher interest rates than non-portfolio loans, they’re critical for high-volume real estate investors because a conventional loan can’t finance more than 10 properties.

(Shortform note: Portfolio loans can also be a good option for buyers who are struggling to get approved for conventional loans, because portfolio loans don’t have to meet conforming loan criteria, and they may not require PMI. However, portfolio loans are harder to secure than conventional loans because fewer lenders offer them.)

Additionally, Greene lists two loans that require you to live in the home (at least initially). If you qualify for these loans, he explains that you can still earn cash flow while living on the property: You can rent out your extra bedrooms in a single-family home or buy a multifamily property and rent the other units. These loans are:

Federal Housing Act (FHA) loan: This loan allows for a lower down payment and lower credit score, but it requires you to pay mortgage insurance unless or until you refinance later.

(Shortform note: As of 2022, FHA applicants can qualify for a 3.5% down payment if they have steady income, proof of employment, a credit score of 580 or higher, and a debt-to-income ratio under 43%.)

Veterans Affairs (VA) loan: This loan requires no down payment and no mortgage insurance. However, VA loans are only available to active or former military members, and Greene says that listing agents often avoid them because they come with stricter guidelines that make it harder to close a sale.

(Shortform note: Among other advantages, VA loans often have lower interest rates and lower closing costs than conventional loans. On the other hand, VA loans prohibit waiving certain contingencies and require buyers to pay a funding fee, which generally ranges from 1.4 to 3.6% of the loan amount.)

Renting and Refinancing vs. Flipping

Greene writes that refinancing in BRRRR is comparable to selling in a house flip (when investors buy fixer-uppers, rehab them, and then sell the properties for profit): In either scenario, this is the stage when the investor recoups their investment in the property.

Although house flippers get bigger one-time payouts from home sales, Greene explains why he prefers the steady income from his portfolio of rental properties. First, home sales are subject to high capital gains taxes, whereas refinances aren’t taxed and the cash flow from rentals is taxed at a lower rate. Additionally, refinances are simpler and involve only the investor and the lender, whereas home sales also involve real estate agents, brokers, title and escrow companies, and others—all of whom charge fees.

(Shortform note: From a wider lens, the main difference between these two approaches is that building a rental portfolio creates steady passive income, while flipping houses requires more active work to consistently buy, renovate, and sell properties.)

Step 5: Repeat

Because you recover your investment during the refinance stage, BRRRR is uniquely designed to make it easier to repeat the process than other investment methods. Greene writes that repetition brings two primary benefits.

First, repetition builds the volume of your portfolio of rental properties, which increases your cash flow. As we mentioned earlier, you can also reduce your proportionate costs by negotiating discounts from members of your Dream Team in exchange for the volume of business you bring them.

(Shortform note: As with other forms of investment, experts recommend diversifying your real estate portfolio. You can do this by buying properties in different areas, buying different types of properties (such as single- and multifamily homes), and branching out into real estate investment trusts and real estate mutual funds.)

The second benefit is that repetition allows you to learn from mistakes and develop systems that make your business more effective and efficient. Systems allow more of your business processes to run on autopilot, which gives you the capacity to take on more investment opportunities that would otherwise overextend you.

(Shortform note: In Traction, Gino Wickman lists three steps to systematizing your business: 1) Identify the key processes for every major activity in your business, 2) list the most important steps for each process, and 3) make it clear that you expect everyone involved to follow these processes.)

Systems Require Delegation

Greene emphasizes that creating systems requires you to delegate or automate the tasks that you dislike and those that don’t play to your strengths. He cites the Pareto principle, or the 80/20 rule, and recommends focusing your time and energy on the 20% of tasks that you do best and delegating the rest.

The first key to effective delegation is clear communication: Be explicit about what you want and expect to avoid misunderstandings, which waste time and effort. Use checklists, spreadsheets, written instructions, and other means to clarify and standardize processes.

The second key is to consistently delegate to the same people, which allows them to benefit from the repetition by learning from their mistakes and improving their efficiency. If you don’t have the financial means to pay your delegates, Greene suggests finding people who benefit from the experience, the working relationship with you, or your industry knowledge.

(Shortform note: In Who Not How, Dan Sullivan and Benjamin Hardy argue that entrepreneurs must delegate tasks to the “experts” on their teams because failing to do so hurts their business. First, an expert will complete a task more quickly because they have the skills and they enjoy the task. Second, if you do something you don’t enjoy instead of delegating it, you’ll do a poorer job, potentially wasting the time of anyone who’s relying on you to be their expert. Third, making decisions and completing tasks cost energy, so reducing your load improves the quality of each decision and task you handle.)