BRRRR Strategy in Canada | Real Estate Investor Guide

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The BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat) is a cyclical real estate investment approach that allows investors to recycle their initial capital to acquire multiple rental properties. This method, widely adopted in North America, is perfectly applicable to the Quebec market with certain adaptations related to the local regulatory framework. The fundamental principle is as follows: buy an undervalued property or one requiring work, perform renovations to increase its value and rental income, rent the units, then refinance the building at its new market value to recover part or all of the initial down payment. The recovered funds then serve to repeat the process with a new building. In Canada, refinancing is limited to 80% of market value under OSFI Guideline B-20 for residential buildings (one to four units). For buildings with five or more units, commercial financing rules apply, with criteria based primarily on the DSCR. In Quebec, investors must account for the Tribunal administratif du logement rules on rent increases, the Building Act requirements for renovation work (permits and Building Code compliance), and transfer duties applicable to each acquisition. The success of this strategy depends on purchasing at a price low enough to create equity after renovation and on rigorous renovation cost management.

The BRRRR Strategy: Recycling Capital to Build a Portfolio

The BRRRR strategy has become one of the most popular real estate investment methods in Canada. Its appeal lies in its ability to allow investors to reuse their initial capital to successively acquire multiple rental buildings, accelerating portfolio growth. Each letter represents a step in the cycle: Buy, Rehab, Rent, Refinance, and Repeat.

The Five Steps of the BRRRR Cycle

Buy: Find an undervalued building: The first step is finding a building sold below its potential after-repair value (ARV). Opportunities are often found in estates, distressed sales, poorly managed buildings, or those requiring significant work. The analysis must confirm that after renovation, the market value will allow sufficient refinancing to recover the down payment.
Rehab: Create added value: Renovations must be targeted to maximize value and rental income increases. In Quebec, work exceeding $5,000 must be performed by a contractor holding an RBQ license. Obtain required municipal permits and comply with the Building Code. The most profitable renovations include updating kitchens, bathrooms, electrical systems, and mechanical systems.
Rent: Stabilize income: Once renovations are complete, rent the units at market rates. In Quebec, a new tenant has the right to have the rent verified by the TAL if the last increase exceeds the indices. Document the condition before and after renovation. Signed leases and a stable income history strengthen your refinancing application.
Refinance: Recover your capital: After a sufficient holding period (typically 6 to 12 months), have the building appraised at its new market value and refinance up to 80% of that value (per OSFI Guideline B-20 for 1-to-4-unit buildings). If the renovation created enough value, you recover part or all of your initial down payment and renovation costs.
Repeat: Reinvest the recovered capital: The funds freed by refinancing serve as the down payment for the next building, and the cycle begins again. Each iteration adds a building to your portfolio, ideally maintaining positive cash flow on each property.

Numerical Example of a BRRRR Cycle in Quebec

Consider a duplex purchased for $350,000 in a mid-sized Quebec city. The investor spends $50,000 on renovations (new kitchens, bathroom, roof). Total monthly rent increases from $1,600 to $2,400. After renovation, the certified appraisal establishes the value at $480,000. The investor refinances at 80% ($384,000), allowing them to pay off the initial purchase mortgage and recover most of their down payment. The net monthly cash flow, after mortgage payment, taxes, and expenses, is positive, and the recovered funds finance the next project.

Key Considerations in Quebec

RBQ license requirement for contractors performing work exceeding $5,000
Obligation to obtain municipal permits before starting work
Transfer duties (welcome tax) payable on each acquisition
TAL rules on rent setting and new tenant's right to contest
Minimum holding period before refinancing (varies by lender, typically 6 to 12 months)
Prepayment penalty if refinancing occurs before the term maturity date

Frequently Asked Questions

What does the BRRRR acronym stand for?

BRRRR stands for Buy, Rehab, Rent, Refinance, and Repeat. Each step is essential to the cycle: the purchase targets an undervalued building, renovation creates added value, renting generates income, refinancing recovers invested capital, and repeating builds a portfolio.

Does the BRRRR strategy work in Quebec?

Yes, the BRRRR strategy is applicable in Quebec but requires adaptations. Investors must comply with the Tribunal administratif du logement rules for rent increases after renovation, obtain necessary permits from the municipality, and ensure the contractor holds a license from the Régie du bâtiment du Québec (RBQ) for work exceeding $5,000.

How long must I wait before refinancing?

Most lenders require a minimum waiting period of six months to one year between purchase and refinancing to recognize the new market value after renovation. Some lenders may accept a faster appraisal if the work is completed and documented. Check your lender's specific policy, as this timeframe varies considerably.

How do I finance renovations in a BRRRR strategy?

Several options exist: personal cash, personal or home equity line of credit (HELOC), short-term private loan, or contractor credit. Some lenders also offer a Purchase Plus Improvements program that integrates a portion of renovation costs into the initial mortgage, provided the work is completed within a prescribed timeframe.

What are the main risks of the BRRRR strategy?

Risks include: renovation cost overruns that reduce profitability, a post-renovation appraisal below expectations preventing down payment recovery, extended renovation delays during which the building generates no income, and difficulty renting units at the planned rate. Rigorous pre-purchase analysis and budget safety margins are essential.