Childhood friends Pieter Louw and Connor Swofford have achieved a remarkable feat in the real estate world, scaling from zero to 24 rental units in just 12 months. The duo, who started investing in Buffalo in 2024, utilized a specific investment strategy to rapidly grow their portfolio while holding down their full-time jobs.
Their success hinges on a method known as BRRRR—Buy, Rehab, Rent, Refinance, Repeat. This approach allows them to recycle their initial investment capital, a key component of their rapid expansion. Now, they are sharing the critical lessons they learned, including two costly mistakes that new investors should avoid at all costs.
Key Takeaways
- Pieter Louw and Connor Swofford acquired 24 real estate units in 12 months using the BRRRR method.
- The BRRRR strategy involves buying, renovating, renting, and then refinancing a property to pull out the initial capital for the next investment.
- Two major pitfalls for investors using this method are incorrect budgeting of time and money, and miscalculating a property's After-Repair Value (ARV).
- The investors stress the importance of disciplined financial analysis and avoiding emotional decisions when purchasing properties.
The Strategy for Rapid Growth
The foundation of Louw and Swofford's success is the BRRRR method. This five-step process is designed for investors who want to build a portfolio without needing a massive amount of new capital for each purchase.
The process begins with buying a property, often one that is distressed or undervalued. Next comes the rehabilitation phase, where improvements are made to increase the property's market value. Once renovated, the property is rented out to a tenant, generating cash flow.
Understanding the Refinance Step
The most crucial step is the refinance. After the property is renovated and tenanted, the investor applies for a cash-out refinance from a bank. Lenders will typically loan up to 75% of the property's new, higher appraised value. This allows the investor to pay off the initial short-term loan and often pull out their original down payment, ready to be used for the next purchase. This is the “repeat” phase.
This method circumvents a common barrier to entry in real estate. "With a $300,000 or $400,000 property, with closing costs, you have to come up with 60 to 80 grand, which is not very scalable," explained Pieter Louw, who is a real estate agent with a background in construction and engineering.
By effectively recycling their initial funds, the partners could move from one deal to the next in quick succession, leading to their acquisition of 24 units within a single year.
Mistake 1: Inaccurate Budgeting of Time and Money
One of the biggest risks in the BRRRR method is underestimating the resources required for the rehabilitation phase. Louw and Swofford frequently use short-term financing, such as hard money loans, to purchase their properties quickly. While effective, these loans come with high interest rates.
This makes time a critical factor. Every delay in the renovation process means more interest payments, which can erode potential profits. "Things go wrong," said Connor Swofford, a startup consultant. He advises new investors to always buffer their budgets and timelines, especially on their first projects.
The Importance of a Good Contractor
A reliable contractor is essential to staying on schedule and within budget. Louw, leveraging his construction background, emphasizes that paying more for a quality contractor can actually save money in the long run.
"A contractor might cost 20% more, but if they're getting the job done faster and more efficiently, that's a month less of interest payments we're making to these lenders — and then also not having it rented out, so it sometimes even saves you money in the long run." - Pieter Louw
To further mitigate financial risk during renovations, the pair developed a specific tactic: they look for multi-family properties where at least one unit is already livable and occupied.
"Almost every property of ours has had a tenant still living in it, and that tenant is basically able to pay the interest expense as we are rehabbing the property," Swofford explained. "So, we basically get to semi-rehab it for free in a way."
Mistake 2: Miscalculating the After-Repair Value
The entire BRRRR strategy depends on accurately predicting what a property will be worth after renovations are complete. This figure is known as the After-Repair Value (ARV). The ARV determines how much money an investor can pull out during the refinance stage.
The ARV Calculation
ARV is the linchpin of the BRRRR method. If an investor buys a property for $100,000, spends $30,000 on rehab, and the ARV is appraised at $200,000, a bank might lend 75% of that value, or $150,000. This would be enough to pay back the initial purchase and rehab costs ($130,000) and leave $20,000 in cash to repeat the process.
Getting this number wrong can have serious consequences. If the final appraisal comes in lower than expected, the investor may not be able to refinance enough money to pay off their high-interest, short-term loan, leaving their capital trapped in the deal.
"If you come in too high on your initial offer, you set yourself up for failure," Louw stated. "Not that it would bankrupt you, but it's really going to bog you down now that you've got all that money tied up in that place... you wouldn't have built up any equity, so you're really just slowing yourself down for the future."
A Disciplined, Data-Driven Approach
To avoid this pitfall, Louw and Swofford are rigorous in their due diligence. They refuse to move forward with a purchase unless the numbers are solid and leave no room for emotion.
Their process involves a deep analysis of comparable property sales in the area to confidently estimate the ARV before making an offer. This data-driven approach allows them to walk away from deals that don't meet their strict criteria.
"We're at a point where we don't need to make any emotional investments," Louw said. "And if it doesn't work out, if we lose to another investor or anything, it's like, 'Okay, well, the numbers didn't make sense for us. Let's move on to the next one.'" This discipline has been fundamental to their ability to scale quickly and sustainably.
