Why I am changing from the BrRRR strategy to the BrRRr strategy

[Stephen Keighery]

I Just closed a cash out refinance on a 6 plex I own in New Orleans. I am switching my strategy a little bit on this refinance. I love the BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) but have always done the BrRRR method (a little rehab). Now I am moving to the BrRRr method. I am toning down the repeat part, or what I normally call recycling my money into the next deal. So instead of rolling all my cash into the next deal I will only roll some of it.

There is a few reasons for this. Some of this is based on my personal portfolio. In the last 16 months I have bought 26 long term rentals using (and recycling) all my own cash (along with a personal residence). The rest is just based on what I see as an increase in risk in the markets. I am definitely not stopping buying, I am just not recycling all my money into the next deal like I have been. I am making greater allocation to reserves and ensuring I am more resilient and can weather any storms that come (Metaphorically and also Physically living in Louisiana).

For example, I will buy a single family next week with the cash from this 6 plex but the rest of the cash is being allocated to making me more resilient. I have more refi's coming and will end up refinancing the single family I buy next week and and each time I will keep investing but also keep shoring up my overall position. 

I am sharing this as I think its time to keep some powder dry. Don't stop buying, because even as interest rates rise they still at very low levels historically and there are still plenty of tailwinds in the market. It is not the time to sit on the sidelines but is time to be aware that headwinds are also increasing. I could see this market crashing and I could see it staying on fire. Both these scenarios are possible. I think this is the time when you need to be prepared for both outcomes. For me if the market crashes then I am ready and it will be an opportunity and if it keeps going up I am positioned to benefit. 

Closed on this refinance today

[John B Clark]

I don’t have anything valuable to add, but I just have to say that getting to learn from folks like you and the other people on here with many years of experience is what makes this forum great for those of us with only a few deals under our belts!