Plant your own money tree(s) 1.Buy a property 2. renovate 3. rent 4. refinance 5. repeat The BRRRR method is a real estate investment strategy that involves a five-step cycle: Buy a distressed property, Rehabilitate it, Rent it out to tenants, Refinance it based on its new, higher value, and Repeat the process with the capital gained from the refinance. The goal is to build a real estate portfolio by using the cash pulled out from a refinance to acquire new properties. The five steps of the BRRRR method - Buy: Find and purchase a property for below its after-repair value (ARV). Investors often use short-term, high-interest loans, such as hard or private money, to quickly secure the deal. - Rehabilitate: Fix up the property. This step is crucial for increasing the property's value and can involve renovations, repairs, and cosmetic updates. - Rent: Once renovations are complete, rent the property out to tenants. The rental income should cover the monthly expenses, and ideally, generate a profit. - Refinance: Secure a new mortgage on the property, using the new, higher appraised value. The goal is to pull out the cash you initially invested in the purchase and rehab, allowing you to get your capital back. - Repeat: Take the capital from the refinance to purchase another distressed property and repeat the entire process. This allows investors to scale their portfolio over time. Key considerations for the BRRRR method - Finding the right property: It is essential to find undervalued properties that require work. A common guideline is the "1% rule," which suggests the monthly rent should be at least 1% of the total purchase and renovation costs. - Financing: Short-term financing is often necessary for the initial purchase and rehab, but it comes with high interest rates and needs to be repaid promptly through the refinance stage. - Market research: Investors often look for cash-flowing markets where rental income can cover costs, rather than markets that are primarily focused on appreciation. - Calculating ARV: Carefully calculate the After Repair Value (ARV) to ensure the property's value after renovation justifies the investment.