We closed on a refinance recently, and the numbers are a good example of why we keep coming back to the same investing strategy.
We bought a property in Memphis for $165,000. After renovation, it appraised for $230,000. We refinanced it with a 20-year loan at 7.25%, pulled our equity back out, and locked in roughly $600 a month in pure cash flow going forward.
That's not luck. That's a repeatable process called the BRRRR method, and it's one of the most reliable ways to build a real estate portfolio without running out of capital.
What Is the BRRRR Method?
BRRRR stands for Buy, Renovate, Refinance, Repeat. It's a strategy real estate investors use to recycle the same pool of money into property after property, instead of needing fresh capital every time they want to add a rental to their portfolio.
Here's how each step works.
Buy
You purchase a property below market value, usually one that needs work. The lower your purchase price, the more room you have to build equity through renovation.
Renovate
You put money into fixing the property up: new flooring, updated kitchens and bathrooms, fresh paint, mechanical repairs, whatever it takes to bring the home up to a standard that supports a strong appraisal and attracts good tenants.
Refinance
Once the renovation is done, you get the property appraised. If the appraisal comes in higher than what you spent on the purchase and renovation combined, you can refinance and pull most or all of your original investment back out, while keeping the property and the equity you built.
Repeat
You take that capital and use it to buy the next property, and the cycle starts again.
Our Numbers on This Deal
Here's exactly how this played out on our most recent refinance:
- Purchase price: $165,000
- Appraised value after renovation: $230,000
- Equity created: $65,000
- New loan: 20-year term at 7.25%
- Monthly cash flow after refinance: approximately $600
That $65,000 in new equity is what made the refinance work. It let us pull cash back out to reinvest, while still holding a property that cash flows every single month.
Why This Strategy Builds Long-Term Wealth
A lot of new investors get stuck after their first purchase because all their capital is tied up in one property. The BRRRR method solves that problem. Instead of saving up a new down payment every time you want to buy, you're putting the same dollars to work over and over.
Done right, it builds two things at once: cash flow you can count on every month, and a portfolio that keeps growing without requiring a constant new source of funding.
It does take work. Finding the right property at the right price, managing a renovation on budget, and getting a strong appraisal all matter. But when the pieces line up, the result is a property that pays for itself and then some.
Thinking About Investing or Selling in Memphis?
Whether you're looking to start building a portfolio the way we just did, or you own a property you'd rather sell than manage, we can help.
We buy properties throughout Memphis and the surrounding area, and we work with investors who want a straightforward path into real estate without the guesswork.
Call or text Spencer's team at (901) 979-9848. Let's build your portfolio together.
Frequently Asked Questions
What does BRRRR stand for in real estate investing?
BRRRR stands for Buy, Renovate, Refinance, Repeat. It's a strategy where an investor buys an undervalued property, fixes it up, refinances it based on the new higher appraised value, and uses the cash pulled out to buy the next property.
How does refinancing after a renovation work?
After renovation, the property is appraised again. If the new appraised value is high enough, a lender will issue a new loan based on that value, allowing the investor to pay off the original purchase loan and pull out the difference in cash, while keeping ownership of the property.
Is the BRRRR method still worth it with today's interest rates?
It can be, as long as the numbers still produce positive cash flow after the new mortgage payment, taxes, and insurance. A deal with strong equity built through renovation, like buying at $165,000 and appraising at $230,000, can still cash flow even at a rate above 7 percent.
How much equity do you need to make a refinance worthwhile?
There's no fixed number, but investors generally want enough of a gap between what they spent and the new appraised value to pull most or all of their original cash back out while still keeping the loan-to-value ratio low enough to qualify for good refinance terms.
Can I start using the BRRRR method with just one property?
Yes. Most investors start with a single property, refinance it, and use the equity pulled out to fund the down payment on the next one. Over time, that cycle is what builds a full portfolio.
Spencer Buys Houses works with investors and homeowners throughout Memphis and the surrounding area. Whether you're building a portfolio or ready to sell, call or text (901) 979-9848.