The Truth About BRRRR in Today's Market

Hey ,

Is BRRRR dead after all? Well, that depends on you. Read on for the truth about this strategy in today’s market…

Inside the Trenches

At the start of the year in 2018, I officially pronounced myself a “Recovering House Flipper.”

It was really just something I thought was funny to say. The reason I started saying it though, was inspired by the fact that I started to focus fully on the BRRRR strategy vs flipping only. By the end of 2017, after hundreds and hundreds of flips, I only had around 7 or 8 rentals (can’t remember exact number right now).

I realized I’d been doing it all wrong (in my opinion). Flipping was awesome and made me a fat income, but it did nothing for building me wealth long term.

Purely flipping encourages you to constantly reinvest your money back into flipping more, hiring more, doing more, going bigger…and also spending more! 

Getting fat checks every month, makes it very easy to get a skewed view on money, and your expenses…

…Going to home depot and spending $500 on tools for yourself, that you normally would never buy, is so much easier to justify when you are used to $80,000 rehab projects multiple times a month…

For me, by the end of 2017, I was tired and burnt out from flipping (I’ve told this story many times of podcasts), and I wanted to make a drastic change in my investing strategy.

So what is BRRRR?

It’s an acronym for “Buy, Rehab, Rent, Refinance, Repeat.” My friend Brandon Turner coined the acronym, but in reality, it is a strategy that has been around since the start of investing in real estate.

There is nothing new about buying a messed up property, fixing it up, stabilizing it (renting it out), and refinancing to get your money out of the deal.  In fact, that’s pretty much the strategy for all real estate long term.

For me, from 2018-2022, I focused purely on the BRRRR. Did I still flip? Of course. But I kept the best, and sold the rest.

And it was SOOO much easier when interest rates were super low. This is for sure true. But with today’s market and higher interest rates, can you still do this strategy?

In order to ask that, we have to first define: WHAT IS A GOOD BRRRR?

You see… I think all the videos I did for BiggerPockets in 2018, 2019, 2020, etc, plus the videos from other investors, did a disservice to a lot of investors out there…especially right now.

Why? Because many of us bragged about our “infinite” BRRRRs. We made it seem like that was the norm and anything less than wasn’t worth your time…

That’s where we significantly raised the values of the properties and increased the rents, so that when we did our refinances, we got 100% of our money out of the deals PLUS cash flow every month. That’s AWESOME!! An infinite return!!

BUT…Infinite returns ARE NOT NORMAL. In fact, if most of us met an investment advisor that said they would get us “infinite returns” on an investment, we would think they were going to cheat us or do something illegal.

…I want to publicly state that I AM SORRY if I made you think an infinite BRRRR is the only good BRRRR. This is not the case…

Now, let’s say that you could get a 9% return on your money, or even a 6%?

And in addition to that 6-9% annual ROI, you would also have an asset that had equity, and if you sold that asset, you could make 15-20% ROI on your money later.

Would that be a good deal?

If it is, then the BRRRR strategy is still good to go for you today.

“But Tarl…I don’t have the ability to ‘LEAVE’ money in a deal and do the BRRRR. I need to flip houses in order to pay bills, and I can make more money flipping today vs keeping properties…!”

Ok, cool, then continue to FLIP!

And in the meantime:

Ask yourself…

What would your future self think of you? Are they going to be happy with you that you sold every house you ever touched? Or will they be happy that you figured out how to keep a few?

I’m willing to bet that your future self is going to want you to get better at your BUSINESS so that you get to make more money… which means you can keep more assets… and avoid the burnout and grind of being addicted to flipping.

Keep the best, sell the rest.

You can disagree with me all day, that’s super all good. The best part of investing is that you can invest however you want.

BUT…don’t tell me there are NO GOOD BRRRRs.

Because that just means to me that you are not good at keeping your money and re-investing it in the right deals.

Talk soon,

Tarl

PS. A couple other thoughts…

Is your market the type that cash flow makes ZERO sense? There are markets out there like that for sure. If that’s the case…explore other markets. You can always flip in one market, and keep houses in another.

Also, figure out how to 1031 houses in a value-add market…and invest that 1031 money into a better class, cash flowing property in another market… It’s life changing if you figure that out.