Tony Stephan uses the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) method primarily with multifamily properties to generate cash flow, build equity, and recycle capital for continuous portfolio growth.
Here is an elaboration on his BRRRR strategy:
Buy
He targets distressed or undervalued multifamily properties that have “value-add” potential from mismanagement or deferred maintenance.
His goal is to buy below market value so that the potential return is built into the deal from the start. He looks for properties where simple fixes can lead to a significant increase in value.
Rehab
Once a property is acquired, he executes strategic upgrades to raise the property’s appeal and value. This focuses on improvements that maximize return on investment, like updating units with new flooring, appliances, and fixtures.
He emphasizes working within a strict budget to ensure renovations are cost-effective and contribute directly to higher rental income and a greater net operating income (NOI).
Rent
After the rehab is complete, the upgraded units are rented out to attract high-quality tenants and begin generating rental income.
Successfully increasing the rental income directly improves the property’s NOI, which is a key factor in its overall valuation for the refinancing step.
Refinance
This is the “magic” step where he gets his initial capital back. The property is reappraised at its new, higher value based on the renovations and improved NOI.
Using a cash-out refinance, he takes out a new, larger loan based on the increased value. The proceeds from this new loan are used to pay off the original purchase loan and also give him cash to invest in the next property.
For example, in one deal, he put down $280,000 to purchase a property and was able to pull out $300,000 in cash after refinancing, effectively getting his down payment back while keeping the asset.
Repeat
With the capital freed up from the refinance, he can fund the down payment and renovation costs for the next BRRRR project, fueling continuous portfolio expansion without needing to save up new money for each deal.
As his portfolio grows, the rental income from previous deals creates a steady stream of cash flow that can be used to pay down mortgages or reinvest.
A significant part of this repetition involves legally avoiding taxes through cost segregation and depreciation, allowing him to accelerate his wealth creation.
