BRRRR stands for buy, rehab, rent, refinance & repeat, and is a popular investment strategy among investors that can help you minimize the capital invested in each property.
Unlike traditional rental properties, the BRRRR strategy involves using a short-term loan (typically an interest-only, hard-money loan) to finance the acquisition and rehab of a property, then refinancing into an amortizing long-term loan after the rehab is complete.
This guide will show you how DealCheck's BRRRR calculator will help you analyze the entire BRRRR lifecycle, from property purchase and rehab, to refinancing and long-term cash flow.
Adding a New Property
Step 1: Click the "Add Property" Button from the Property List
Navigate to the BRRRRs list and click the Add Property button at the top right:
Step 2: Select the "Enter Manually" Option
Our software allows you to import property data from public records or copy an existing property, but in this tutorial, we'll add the property manually and explain all of the parameters you can customize along the way.
Select the Enter Manually option to launch the step-by-step wizard:
Tip: you can save a lot of time by customizing your property templates and using one of them when adding new properties. Read this guide to learn how to do this.
Step 3: Fill in the Property Description
The first step is to enter basic details about the property, including a name, property type and address. All of the fields here are optional, so you can fill in as many details as you want:
Here are the most important fields to fill in:
Name: this will be the name of the property used throughout our app. Some people simply use the property's address, while others like more creative names, like "2/1 Condo in South Beach, Excellent Condition"
Tags & Labels: you can add custom tags and labels to this property to help you categorize it, track its status and quickly find it later
Address: enter the address of the property to view it on the map, look up sales & rental comps, as well as to access its public records later
Property Type: select the type of the property from the available options. This field is important, as it will enable or disable other fields based on your selection
Description: enter any of the basic home attributes that you know about this property, including bedrooms, bathrooms, square footage, year built, parking, etc.
Click the Next Section button at the bottom of the page to continue:
Step 4: Enter the Purchase & Rehab Information
The next section goes over the property purchase and rehab:
Here is what you should customize:
Purchase Price: the amount you're paying to purchase this property
After Repair Value: the estimated market value of the property after the rehab work is complete. This will be used to calculate the refinance loan information
Financing (Purchase): if you're going to use financing to purchase and rehab this property, enter the details of your loan in this section, including the loan type, interest rate, and term. Disable financing if this is a cash purchase
Purchase Costs: these are all costs and fees associated with purchasing the property, also called closing costs. Examples include loan points, escrow fees and property inspection fees. You can enter a total amount as a percentage of the purchase price, or click the Itemize button and enter a detailed list of each purchase cost separately
Next, use the Rehab Costs section to customize your rehab budget for this project:
First, you'll want to customize your rehab items and costs.
Although you can enter a total rehab dollar amount, you'll most likely want to itemize and break down your rehab budget. Click the Itemize button and enter all of your anticipated scope of work items in the provided worksheet:
Tip: see this guide to learn how to create reusable rehab budgets and scope of work templates to help you quickly analyze new projects.
You can also customize these additional rehab fields:
Cost Overrun: this is the anticipated increase of the rehab budget beyond the originally planned amount. Think of it as a safety buffer in case you have unexpected expenses
Holding Period: enter the amount of time you anticipate it will take to finish the rehab and sell this property
Note: the holding costs during the rehab phase will be automatically calculated for you based on the Operating Expenses you'll enter later.
Click the Next Section button at the bottom of the page to continue:
Step 5: Enter the Refinance Information
Use the Refinance section to enter the details of the long-term loan you will be using, as well as the refinance costs you expect to pay:
Customize the following:
Financing (Refinance): enter the details of your long-term loan in this section, including the loan type, interest rate, term and any mortgage insurance
Refinance Costs: these are all costs and fees associated with refinancing the property, also called closing costs. Examples include loan points, appraisal fees and recording fees. You can enter a total amount as a percentage of the ARV, or click the Itemize button and enter a detailed list of each refinance cost separately
Click the Next Section button at the bottom of the page to continue:
Step 6: Enter the Rent & Expenses Information
Use the Rent & Expenses section to enter the projected rent you're going to collect from your tenants, your operating expenses, as well as long-term projections:
First, customize the rental income:
Gross Rent: the total gross rent you expect to collect from your tenants. You can also change the rent collection period, which is useful for analyzing short-term BRRRR rentals like Airbnb's
Vacancy: enter the percentage of time you expect the property to remain vacant
Other Income: use this to enter any miscellaneous income you expect to receive from this property, like storage rental, coin-operated laundry or parking fees. You can enter a monthly total or itemize the list
Next, customize the monthly and yearly recurring expenses. You can enter an estimate as a percentage of the gross rent (useful if you're doing a quick analysis using the 50% Rule), or itemize the expenses to get more accurate projections:
When itemizing expenses, you have several options for how to enter each item:
A monthly or yearly amount: good for fixed costs
A percentage of the purchase price: for things like property taxes
A percentage of the gross rent: for maintenance, management or capital expenditures. You can choose to calculate these items either before the vacancy is subtracted from the gross rent, or after
You'll also see a BRRRR Phase toggle for each operating expense. Use this to select during which phase(s) of the BRRRR cycle (rehab or rental) you will pay this expense.
The final section of the wizard has several additional inputs and projections you can customize to further fine-tune this deal:
Here is an overview of what each of them is for:
Appreciation: the anticipated annual increase of the property's market value. This is important to calculate how the property's value will increase in the future
Income Increase: the anticipated annual increase of the gross rent and any other income. In most cases, the property's rent will increase each year and this is the percentage it will increase by
Expense Increase: the anticipated annual increase of the operating expenses. Expenses will typically rise due to inflation and other factors
Selling Costs: an estimate of the costs and fees associated with selling this property, also called closing costs. We use this as part of the ROI calculation
Depreciation: use the provided inputs to customize the depreciation deduction for this property, including the depreciation period and the property's land value. You can also turn off depreciation if it's not applicable to this property
When finished, click the Save Property button at the bottom of the page to add this property to your dashboard:
Viewing the Property's Analysis
Now that you've added this property, you can view a full breakdown of the purchase & rehab information, holding costs, refinance cash out, cash flow and investment returns on the Property Analysis page:
Tip: hover over the question mark icons next to any metric to view their descriptions and calculation formulas.
If you need to edit any of the parameters of this deal later, go to the Purchase Worksheet page from the property menu on the left side:
Adjusting the Length of the Rehab
One of the factors affecting your total invested cash (and your long-term returns) for a BRRRR deal is the holding period - the length of time it will take to rehab the property. Longer holding periods will increase your expenses and decrease your returns.
You can quickly adjust the holding period of your BRRRR from the Property Analysis page by dragging the slider above the Holding Costs section:
As you do this, you'll notice the holding costs, invested cash and returns adjusting as well. If you find a new holding period you're happy with, you can quickly save it by clicking on the save button to the right of the slider:
Viewing Long-Term Buy & Hold Projections
While the Property Analysis page shows the numbers for the first year, you may want to see how this BRRRR property will perform in the future as well.
Click the Buy & Hold Projections link from the menu on the left side to view cash flow projections for up to 35 years into the future:
By default, this page will show projected numbers for years 1, 2, 3, 5, 10, 20 and 30. You can view projections for other years by opening the dropdown at the top right:
Tip: scroll the table left and right to view information for additional years.
What's Next?
Once you've added a new BRRRR property, it will remain in your account and you can come back to it at any time from the property list:
Here are some other things you can do with this property:
View recent sales comps: view a list and a map of recent comparable sales to help you estimate the ARV of this property
View recent rental comps: view a list and a map of comparable rental listings to help you estimate the potential rent of this property
View public records & active listings: view up-to-date property and listing information to help you do research and watch for price changes
Calculate your max offer: use the offer calculator to calculate the highest price you can offer to the seller to meet your investment targets
Look up its property owner: view the name(s) and contact information of the current owner(s) of this property
Share a property report: create and share a professional property report with your lenders, partners or clients
Check this property against your criteria: customize your target investment criteria and see if this property meets it
Analyze alternative strategies: quickly copy this property to analyze different acquisition or financing strategies
Compare this property with others: compare this property side-by-side with other potential investments to help you find the best deals
Note: the above screenshots were taken from our website, but the same features can be found in our iOS and Android apps as well.