How to Do a “Slow BRRRR” in 2025 (Better Than BRRRR)

0:00This is how you do the slow BRRRR, my personal favorite real estate investing strategy of 2025, and I'm going to tell you how to do it step by step. The BRRRR has been a very popular way to quickly scale a profitable real estate portfolio, even if you're starting without a lot of capital. And it can still absolutely work in today's market, but you've got to make a couple essential updates to the tried and true formula. And today I'm going to show you how to do it.

0:33hey what's up everyone i'm dave meyer host here at bigger pockets and on this show we help you pursue financial independence through real estate and we're glad to have you all here today we released a recent episode of the podcast episode 1165 it was back on august 25th and it was called this is better than the burr method all about how to do burrs in 2025 and you guys seem to love that episode so much that today I'm going to go into more detail and more depth and explain exactly how you can execute a slow BRRRR rental property deal step by step. To me, this is the best strategy right now to use to add value and increase the upside of your deals, but you just need to take into account current prices and current rates when you're figuring out how to actually go about executing one of these deals.

1:22Let's dive into it. So first things first, what is a BRRR in the first place, then we'll get to what is a slow BRRR and how you actually go about it. But BRRR is an acronym. It stands for buy, rehab, rent, refinance, and repeat. And the idea behind a BRRR is that you buy a property that's not up to its highest and best use. It can be fully distressed, or it might just be a property that needs a little bit of love, but you're buying something that's not really stabilized and being used in its best possible way. Then you renovate that property to not just raise the value of the property like you would do with a flip, but also to raise the rents that you can generate because this is a rental property deal.

2:04Once you've done that, you rent it out at the new market rate that you've brought those rents up to. At that point, you could call the property quote unquote stabilize, right? You've brought it up to its highest and best use. You've got market rents going for you. And at that point, you can refinance at the new appraised value, pull some cash out, and then use the cash that you just used to get that first deal and use it basically a second time, recycle at least some of that money into the next deal that you want to go and acquire. And there are scales to how effective or how aggressive you want to be on a BRRRR.

2:39You could refinance some of it. There is something that some people call the quote unquote perfect BRRRR, where the cash out refinance pays back 100 % of your initial capital, both your down payment, your rehab costs, your closing costs. You're able to, in a perfect BRRRR, refinance all of that so you can basically recycle 100 % of your money. But there are other ways to use a BRRRR effectively to increase your cash flow, to improve your net worth, to grow your portfolio. But no matter how you actually utilize the BRRRR strategy, it is just overall a super appealing option for people who are looking to scale and who are maybe starting with a limited amount of capital.

3:22Because as I said, the BRRRR method allows you to recycle that capital. And that means you can use your money that you have very, very efficiently to scale a rental property portfolio. Now, of course, some things have changed since 2012, 2015, even since 2021. Rates aren't near zero anymore. Underwriting is a little bit tighter. Appraisals that you're getting and are super important to the refinance portion of the BRRRR are a little bit more conservative. And as we all know, renovations have gotten considerably more expensive. And I should also say in the last year or two, rents have sort of stagnated.

3:57And this has changed the way that BRRRR works. But is BRRRR dead? No, absolutely not. None of these things kill BRRRR. If you've been listening to the show, I think you all know, I think this is crazy that this has killed BRRRR. It just changes the approach. You have to tweak the strategy and the tactics that you use based on what has changed over the last couple of years. One thing, and I think the main thing that you really need to change if you're going to succeed with BRRRR in 2025 and get all these amazing benefits and be able to recycle your capital, is that you have to change your expectations a little bit.

4:32because during the BRRRR quote unquote heyday, right, from like whatever, 2017 to 2022, this sort of idea emerged where that the only BRRRR that is worth doing is that perfect BRRRR that I mentioned before, where you take out 100 % of your equity. And of course, if you can do that, you should. But the idea that that's the only thing that makes BRRRR worth it, I think is really crazy. And it's honestly really detrimental to the majority of investors out there because they're overlooking what could be great wealth building, cash flow producing deals because it's not 100 % perfect. There is a saying that perfect is the enemy of good, and I think that applies really well to the situation with BRRRR.

5:16To be clear, I am not saying that it's wrong to look for an 100 % BRRRR. If you can find that perfect BRRRR, go out and do that. That is absolutely awesome. But it is important to know that in today's market, being able to do that is an outlier. That is not what should be expected. That is not normal. If you can find it, you found yourself a home run or a grand slam, but you should not overlook deals that don't meet that very strict criteria because that means you're going to overlook what could be a lot of great, great deals. By all means, if you can find it, do it. But it's just not normal and that's okay.

5:51hey, you could still use the many fundamentals of BRRRR to scale and grow. And I'm going to share with you the approach that I've been using to BRRRR over the last couple of years. I've done several deals like this. It works well for me. And I think it's just the right approach to real estate investing in the current environment that we're in. So this is the approach that I have been using. I call it the slow BRRRR. Still uses the same fundamentals as BRRRR, just tweaks it for modern conditions. Here's my basic thesis, because I think, you know, before I share with you exactly how to do this step by step, I want to share with you at least my thinking and how I came about this strategy.

6:31Number one, value-add investing works really well right now. Some people call this forced appreciation, but value-add investing is basically buying a property that's not being used that well or has fallen into disrepair or needs a little bit of love, renovating it to drive up the value of that property. and if you're doing it right, you're increasing the value of the property by more than you're paying to increase the value of that property. So just as an example, you buy a property for 200 grand, you put 50 grand into it, then it's worth 300 grand. That's value at investing because you spent$50 ,000 to increase the value of your property, $100 ,000.

7:10And I hope you all agree with me that if you can do a deal like that, you do it all day long. And right now in today's market, even though cashflow is harder to find and there are real obstacles to real estate investing, value-add investing is working really well. There's all sorts of macroeconomic reasons for this, but you see this with flippers who are still making money in today's environment, even though prices aren't going up like crazy. And the same thing applies to BRRRR investing, which is why I use it as the foundation of the investing strategy I'm using right now. The second thesis that I have that drives this belief is that on-market deals are getting better, they're becoming more abundant, and you can negotiate better deals.

7:51If you listen to me on the show, you know that I'm not someone who has some sophisticated deal flow operation out there. I am not sending direct letters. I don't do Facebook ads. I don't do any of that. I find my deals either through my real estate agent, so on-market deals, or from pocket listings that, again, usually come to me through my real estate agent. But in my experience over, I'd say the last year, really, the number of good opportunities on the MLS, just on market deals, is increasing. And as we enter an increasingly strong buyer's market, I think those deals are going to come more and more.

8:30And it means that you're going to be able to negotiate better. And that is really key to the BRRRR strategy because if you're buying a distressed property, you need to buy it deep. You need to buy it under market comps. And I have seen this myself and I talked to tons of investors who are also seeing this, but your ability to negotiate down, particularly properties that haven't been renovated yet, is going up. Your ability to do that is increasing and is probably going to keep increasing, which is another reason I like this slow burr. Third, properties are sitting on the market a little bit longer, which not only means that you can negotiate, which is key to the burr, but it means that you can take a little bit longer to close, which I'll explain in a little bit is an important element of the step-by-step guide I'm going to give you because I think the way you finance a burr right now really matters.

9:21And I actually have sort of a contrarian take about how you should finance burrs. I'll get into that, but it requires that you can close at a slower pace, which I know is possible in today's day and age. And this is just an example. These are just a couple of examples that you can invest in any kind of market, but you have to think about how you can use market conditions to your advantage. Because right now, prices across the country are relatively flat. I think that's going to continue. I think they might even go down a little bit on a national basis in the next year or two. And so what I'm looking at is how can you take advantage of this?

9:55Because just like in the stock market, people don't stop investing in the stock. If the market's going sideways or a little bit down, they just adjust their strategy. And this is exactly what we're doing with the slow BRRRR. The last part of my thesis here never changed. This is always my thesis on real estate investing is you got to do it for the long term. You are in this for long term wealth creation. And the BRRRR, as the name implies, it means you're being a little bit more patient about the BRRRR, but that doesn't really matter because to me, real estate investing is a long-term game anyway, and I will take as much time as I need to lock up a great deal.

10:29And the slow BRRRR is a perfect example of that. So these are my baseline beliefs right now. And if you're with me, which I'm hoping you are, then you ask, what is the play? How do you take these market conditions and use them to your advantage? We're going to get to that right after this break. Most banks will give you a line on your primary residence and stop there. Avon looks to underwrite the equity in your investment property, the second home you have, the property you hold in your own name, and put a line of credit against it on a Visa card. Same asset, same logic. Think about what this unlocks.

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14:28Welcome back to the BiggerPockets podcast. I'm Dave Meyer sharing my strategy for 2025 rental property investing, which is using the quote unquote slow BRRRR strategy. Before I explained my thesis, why I think this works. And now let's talk about the playbook. How do you adjust the great fundamentals of BRRRR to the market conditions I just talked about to benefit you and your portfolio? Number one, you find an on-market deal that is habitable and eligible for conventional debt. This is a big difference from the way a lot of people do a BRRRR. A way most people do a BRRRR is similar to flipping a house where you look for something that is unoccupied so that you can start your renovation immediately.

15:12And because of that, you traditionally have to use hard money, private money, or other forms of high interest debt. Because what you're going to do is try and renovate this really quickly, refinance as quickly as possible. And so paying high interest debt is not as big of a deal. But when you're doing a slower burr, like I am advocating for, you don't want to get caught with that high interest debt. So you need to find something that is habitable and you can get a normal mortgage rate on. The difference in this is if you go out and get a normal mortgage rate right now, even for investors putting 25 % down, you're probably around 7%.

15:48If you're getting hard money loan, you're probably playing close to 12 or 13%. And that's going to make a huge difference in your returns over the lifetime of this deal. And so getting that conventional debt is absolutely critical for the slow burn. So that's step one. And we'll talk about what to look for in your buy box in just a minute. But that's the thing you need to remember. This is an on-market, habitable deal that can qualify for conventional debt. Second criteria you're looking for is to find a place that can cash flow within three to six months. Ideally, the way that I've been doing this is that you look for deals that are occupied and cash flow today.

16:26So I like to buy small multifamilies, two to four units. And what I look for is a place that is going to be at least break even, ideally a little bit better cash flow today. Or like if I were buying a duplex, I would take one where it's not cash flowing right away if one of the units is vacant or is going to be vacant very soon. Because what I'm thinking in that scenario is if one of the units becomes vacant and I can do my renovation of that unit soon and the new rents are going to get me above cash flow break even and to cash flow positive, I'm okay with that. That's why I said it needs to be able to cash flow within three to six months.

17:03And the reason I'm thinking this and doing this approach, same reason I specified an on-market conventional debt deal, is because we're in a weird market. And my number one priority for any deal that I buy right now is to protect myself against downside risk. I, of course, want to make as much money as possible on any of those deals, but that is actually a secondary thing for me right now. Now, first things first is how do I protect my principal and make sure even if things go really poorly in the macroeconomic environment, things that I can't control, that I know that I'm okay. I can hold on to this property as long as I need and I will have flexibility in how I execute my business plan.

17:42So these two things go along with that idea of protecting myself. So that's what you need to do within a couple of months. You need at least, let's call it 2 % cash on cash return. But then you obviously need more upside than that. I just mentioned you got to protect against the downside, but then you also need to make sure that you're earning a good return on this over the long run. And so for me, that means at least an 8 % cash on cash return after stabilization. If you haven't heard this term stabilization, it just means the point at which you've taken a property that was a little bit rundown and needs a renovation.

18:17And it is actually not just renovated, but rented out at market rates. So you've basically taken something that wasn't being used well and you're using it really well. That's the point of stabilization. And for me, when I do a slow bird deal, I need at least an 8 % cash on cash return once I've stabilized the property. Now, 8 % is the minimum if it's in a great neighborhood. If this is an awesome asset in a great location, I'll take 8%. To be honest, I'd probably take 7 % also, but I'd try to find 8%. If the property is not in a great neighborhood and is maybe going to have a little bit more risk, I would target a 10 to 12 percent cash on cash return.

18:56Now, those might seem like random numbers and everyone's going to make up these numbers for themselves. But the way I think about it is that the stock market, which is another place that I could choose to put my money. I put the vast majority of my wealth into real estate, but I could put in the stock market. But the stock market returns eight or nine percent per year. And that is really passive. Like I'm doing nothing for that. And so I want my cashflow alone to get close to that number of eight or 9%. And then the other benefits of real estate investing, like appreciation, the tax benefits, the amortization, all of that stuff is taking me from an 8 % cash on cash return to a total return that's somewhere between 12 or ideally a closer to 15%.

19:39And to me, that's what makes real estate worth it. If I can get a 12 to 15 % return, that is so much better than the stock market that it is worth my time and energy. And I know that might not sound a lot, the difference between eight or nine to 12 to 15%. Do yourself a favor, go look at a compound interest calculator, put in$10 ,000 and see what compounding at 8 % over 30 years does. And look at what compounding 12 % for 30 years does. You will be absolutely shocked and you will see why the difference between an 8 % return and a 12 % return can actually be truly life-changing over the course of an investing career.

20:16So I want that 8 % cash on cash return minimum, and I'm targeting my stabilization period to be between 18 and 24 months. So just as a reminder, I need it to be breaking even in cash flow within six months, but if it's not fully stabilized for a year after that or 18 months after that, I'm okay. Those are the deadlines I set for myself. At six months, it's got to be breakeven, ideally a little bit better. And by two years, it has to be beating the stock market by a considerable margin to be worth my time. So then next, you execute the value add. And again, like I said before, ideally, you want to do it quickly, right?

20:52But the thing about the slow burr and buying something that's occupied is that could take a little bit longer. Because if you have a duplex and your tenant chooses to move out after a year, then you can't do the renovation for a year. And personally, I'm okay with that precisely because I'm looking for something that is already cash flowing. I am not going to skip over a good deal because I can't do that renovation in the first three months. If it's a great asset and it's going to be a good long-term addition to my portfolio, I'll wait. I'll wait 12 months. I'll wait 18 months. I'll wait 24 months to do that deal.

21:26and I know for some people that's not appealing because that means you can't recycle your capital as quickly but for me this is the best risk adjusted return that I can earn in this kind of market. It might mean that I don't buy another deal for a couple months using that capital but that's okay to me because it means that I am protecting myself and getting a rock solid deal with great risk adjusted returns. Then once you've stabilized it you have the option to refi and I know that most people listening to this are going to choose to refi. I do in most situations as well. But I just want to call out that you don't have to.

22:02You can just keep the equity in your deal if it's a great deal or you want to preserve your cash flow. Because if you refinance, then that means you are taking out additional debt on top of what your original mortgage was. And hopefully you're still cash flowing. If not, you should not be refinancing. But your mortgage payments are going to go up in most cases unless rates really drop. But in most cases, your mortgage rates are going to go up. And so you're basically have a trade-off. You have a decision to make. Do I want to take out more capital to recycle and use in future deals? Or do I value higher cashflow?

22:34And what you decide is totally up to you. I think eventually most people do want to recapture some of that equity to put into another deal. But my recommendation with the slow burr is only do that when you're ready to do your next deal. Don't just go and refinance in three months or six months or nine months just because you can. do it when you have an idea of how you're going to use that money. Because if you just leave the money into your first deal and not refinance, your cashflow is going to be better. And so the only reason, at least in my mind, the only reason to reduce your cashflow is because you have another great deal lined up.

23:10And so I recommend just refinancing when it's opportunistic, when it's a good time for you to do that. And all these things together are why I call it slow, not because it's lazy or anything like that, it's just opportunistic and it's sequenced. You can capture value in stages. You don't need to get it all up front because yes, ideally you do want it all up front, but when you try and cram all this value creation into just a couple of months, more things can go wrong. It's like anything in investing. There is more opportunity. Yeah, you have a higher potential for return, but more things can go wrong, right?

23:49Your appraisal might not come back. You might not be on budget. You have a lot of time pressure to execute your renovation really, really quickly. And if you're a new investor, that can be really intimidating. The slow burr basically takes that time pressure away and says, you got two years to maximize the value out of this property. And to me, that's a great timeline for pretty much anyone, regardless of how much experience you have to maximize the value of any asset. And that's why I like this strategy so much. All right, so that's the high-level overview of the slow burr. We've got to take a quick break, but when we come back, I'm going to give you some real numbers and real examples of how you can do this and then walk you through the step-by-step guide to pulling this thing off.

24:29We'll be right back. Tax season reminder for all the real estate investors listening. If you own rental properties, short-term rentals, commercial buildings, basically anything that's not your primary residence, you need to know about cost segregation. It's an IRS-compliant strategy that lets you accelerate depreciation on your properties, which means you're paying less in taxes this year and keeping more cash in your pocket for your next deal. Cost Segregation Guys is the go-to firm, having done over 12 ,000 of these studies with$500 million in total depreciation identified. Head to costsegregationguys.com slash BP to get a free proposal and see your potential tax savings.

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