BRRRR Method (UK): What It Is, How It Works (Pros And Cons) (2024)

The BRRRR method—Buy, Rehab, Rent, Refinance, Repeat—is a powerful strategy for building wealth through real estate, especially in the UK.

This approach allows investors to grow their property portfolio strategically, generating passive income and long-term equity.

Let’s explore how BRRRR works and why it’s gaining popularity among savvy investors.

What is the BRRRR method?

BRRR stands for Buy, rehab, rent, refinance, and repeat. The BRRRR method is a dynamic real estate investment strategy designed to grow your portfolio and generate wealth through strategic acquisition, renovation, and financing.

Here’s a breakdown of the BRRRR method in property investment and real estate:

• B: Buy: Identify and acquire undervalued or distressed properties with strong rental potential.
• R: Rehab: Make necessary repairs and renovations to improve the property’s condition, functionality, and market value.
• R: Rent: Lease the renovated property to qualified tenants, generating rental income that offsets your expenses.
• R: Refinance: Once the property’s value has increased, refinance the mortgage to pull out a significant portion of your initial investment and any additional equity gained through renovation.
• R: Repeat: With the capital freed up from refinancing, you can repeat the process by acquiring another property and starting the cycle anew.

What are examples of the BRRRR method?

Here’s an example for you to understand the BRRRR method better.

1. Buy: Suppose you want to buy a house worth $150,000. So, you secure a loan for $120,000 with a $30,000 down payment.
2. Rehab: You invest $25,000 in renovations, focusing on kitchens, bathrooms, and curb appeal.
3. Rent: After the renovations, the property is appraised at $200,000, and you secure a reliable tenant for $1,500 monthly rent.
4. Refinance: With the increased appraisal, you refinance the property at 75% loan-to-value (LTV), securing a new loan of $150,000.
5. Repeat: This refinance helps you get back your original $150,000 investment (down payment + rehab costs) and potentially additional profit from the increased value. With this capital, you can acquire another property and repeat the BRRRR process.

Advantages of the BRRRR method in real estate

Here are the Pros of the BRRRR method in real estate and property investment strategy:

• You get to build a portfolio:

The BRRRR process is all about acquiring new properties so you build a property portfolio over time.

• Earning from passive income:

The more properties you acquire, the more rental income you can generate. If you select the right properties with good rental potential, you can have a steady cash flow from these rental incomes.

• Increased equity and value:

The renovations of the BRRRR method can significantly increase the property’s value. With this equity gain, you can secure a higher loan amount and boost the overall value of your property portfolio.

• Access to new capital:

When you refinance your property after renovation, in most cases, you will recover your initial investments along with additional equity gains. You can then use this new capital to purchase your next property.

• Ability to create wealth:

By acquiring income-generating properties and benefiting from their appreciation, you can create secure wealth for your future.

Disadvantages of the BRRRR method in real estate

Below, I have listed the Cons of the BRRRR method in real estate and property investment:

While there are several benefits of the BRRRR method, it has its downside, too. Hence, here are a few disadvantages of the BRRRR method.

• Financing challenges

Securing financing can be a big challenge for some, especially for the first property that you buy. You need to get a loan at an interest rate so that the loan-to-value (LTV) ratio is in your favour.

• Renovation challenges

You need to be very strategic with your renovation costs to be profitable. Any issue like a sudden rise in material cost or delay in the rental process can put you under pressure.

• Management responsibilities

BRRRR involves ongoing property management tasks, including tenant screening, maintenance, and potential legal issues. Being a landlord requires time and effort. Or you could hire a property management company, which adds to the overall cost.

• Time commitment

The BRRRR method is not a get-rich-quick scheme. It requires significant time investment in property searches, negotiations, renovations, and ongoing management. Be realistic about the time commitment involved.

How does the BRRRR method actually work?

The BRRRR method in real estate is a multi-step process of building wealth. In this process, you buy, rehab, and rent a property and then refinance it to acquire a new property.

How long does the BRRRR method take?

It is difficult to put a timeline for the BRRRR method as it depends on a lot of factors. Your time would be much shorter if you already have the financing and property in hand.

However, in general, each stage of this method (from buying to renting) can take months. This means a full cycle can take you anywhere between 6-12 months or more.

Should I house flip or BRRRR?

House flipping and BRRRR might have some resemblance, but they are not the same. Both have different focuses, timelines, and pros and cons.

So let’s have a BRRRR method vs house flipping comparison side by side to understand which one you should go with.

How can you achieve cash flow with the BRRRR method?

The key to achieving cash flow through the BRRRR method is to keep your acquisition cost and renovation costs under check. Let us give you an example of how you can achieve a steady cash flow through the BRRRR method in real estate.

If you want to have a positive cash flow from the very beginning, you can follow the 1% rule. The rule suggests that your monthly rent should be at least 1% of your total investment in the property. This includes purchase price, renovation costs, and other ongoing expenses.

So, if your total expense is 100k, you’d aim for a minimum monthly rent of 1000.

Here’s a detailed example for you to understand it better. You can buy a wrecked house for 25K (or lower if possible; the cheaper it is, the better it would be for you.)

Then let’s say you put 50K into renovating the property. So your investment in that house becomes 75k (25k buying 50k for rehabbing).

Now, for this amount, you have to find a tenant who would pay rent of around 1.5K per month. If you follow the 1% rule, you have to get a minimum of 750 per month to break even. We are keeping it double so you can enjoy cash flow from the very beginning.

Due to the renovations and fixing, you can now appraise the value of the house to, let’s say, 125,000 and get a refinancing of 100K.

This 100K returns your initial 75K investment and gives you an extra 25K for emergency funds.

With this 75K-100K now, you can acquire and rehab another property and keep the cycle going.

In the meantime, you will be getting that 1.5k a month, which you could use to repay the mortgage on that 100k financing. Depending on whether you choose a 15 or 30-year amortisation plan, your payment would be around 450-750 per month.

Minus that from the 1.5k per month rent, you still save 50% of the rent.

You still need to keep a fund aside for maintenance and let’s say you are left with 200 a month. Now, this 200 a month might seem like a lot less of a cash flow, but the idea of BRRRR is to snowball the business.

So, the more rental properties you acquire, the higher cash flow you generate. Plus, let’s not forget that you have 100% of multiple properties that will appreciate over time.

How to find good BRRRR property deals?

The first and most important thing is to find the right property. You need to find a property that can be bought cheaply, can be renovated and put up for rent at a good price.

Here’s how you can find a good BRRRR property deal.

1. Understand the market

Start by selecting a neighbourhood where you can rent properties at a good price. Also, factors like occupancy rates and property appreciation history of that area should be considered.

You should also look at numbers like average rental rates, property values, and recent sales data for that targeted area.

2. Identify potential deals

You can network with realtors and wholesalers to find undervalued properties. Before finalising a property, consider the renovation costs.

3. Analyze the property for BRRRR suitability

Consider the after-repair value (ARV) of the property. The purchase price plus renovation costs should be significantly lower than the ARV.

You can use online calculators to calculate the profitability of the property. Also, consider taking estimations from reliable contractors to determine the renovation costs.

You should also do the cash flow analysis at this point (the 1% rule) to ensure that the project will profit you.

How much do you need for the BRRRR property method in real estate?

There’s no exact number that we can give you, as it depends on the price of the property you are buying and the renovation costs. Plus, it also depends on the area where you purchase the property.

For example, HCOL areas expect higher purchase prices, potentially requiring a larger initial investment. Meanwhile, in normal areas, you may find more pocket-friendly deals, which can be a good entry point for you.

Does the BRRRR method work in the UK?

If you ask- is the BRRRR method still profitable? Our answer would be yes. However, success heavily depends on how well you plan everything.

With the right planning, you not only get a cash flow but also build a portfolio of multiple renting properties. Just carefully assess factors like property prices, rental yield, and financing options.

Can you do the BRRRR method with a mortgage?

Yes, you can do the BRRRR method with a mortgage. It is often a special type like a hard money loan or fix-and-flip loan suited for short-term renovation projects. You then refinance into a traditional mortgage after the rehab to free up capital for the next BRRRR cycle.

Can I do the BRRRR method with no money?

Executing a BRRRR method without money is difficult but not impossible. However, the downside is that you will heavily rely on financing.

You can try using strategies like seller financing or partnering with private lenders if you have good negotiation skills and a strong credit score. However, remember that it will be more complex and high-risk so think before you proceed with it.

How Pluxa Property help you in the BRRRR investment in the UK?

The biggest challenge with the BRRRR method is to spot the right properties and get them renovated under the right budget and Pluxa Property can help you with both.

One of the specialisations of Pluxa Property is BRRR deals. We can:

• Source property deals for you,
• Negotiate the terms on your behalf,
• Renovate the place to make it hospitable,
• Market the property to keep the bookings 100%,
• Find tenants to lease out your property,
• Take care of operations and management.

Explore how Pluxa Property, UK’s biggest property investment company can help you:

• Rent To Serviced Accommodation services in UK
• Buy to Service Accommodation Investment services in UK

Therefore, Pluxa helps you in almost every stage of your BRRRR method.