BRRRR Method Explained: Buy, Rehab, Rent, Refinance, Repeat
The BRRRR method lets you build a rental portfolio using the same capital over and over. Learn how this powerful strategy works, when to use it, and how to analyze BRRRR deals.
What Is the BRRRR Method?
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It's a real estate investment strategy that allows you to recycle your initial capital by forcing appreciation through renovation, then pulling that capital back out via refinancing.
The Core Concept:
Instead of leaving your down payment trapped in one property forever, BRRRR lets you:
- 1.Buy a property below market value
- 2.Increase its value through renovation
- 3.Refinance based on the new, higher value
- 4.Recover your initial investment (or most of it)
- 5.Use that capital to buy another property
The 5 Steps of BRRRR (Detailed Breakdown)
Buy
Find undervalued properties
Purchase a distressed property below market value. Look for properties that need cosmetic or moderate repairs but have good bones and are in solid rental neighborhoods.
Key Tips:
- Target 70-75% of ARV (After Repair Value)
- Look for motivated sellers, foreclosures, estate sales
- Focus on cash flow markets with strong rental demand
- Verify comparable sales and rental rates before buying
Rehab
Force appreciation through improvements
Renovate the property to increase its value. Focus on improvements that add the most value relative to cost—kitchens, bathrooms, flooring, and curb appeal.
Key Tips:
- Get multiple contractor bids before starting
- Create a detailed scope of work with timeline
- Focus on tenant-friendly, durable materials
- Don't over-improve for the neighborhood
Rent
Place a quality tenant
Find a reliable tenant to establish rental income. Screen thoroughly and set rent at market rate to maximize your appraisal value during refinance.
Key Tips:
- Screen for income (3x rent), credit, background
- Price at market rate—not below, not above
- Use a professional lease agreement
- Get a 12+ month lease signed before refinancing
Refinance
Pull out your capital
Get a new loan based on the property's improved value. Most lenders offer 70-75% LTV on cash-out refinances, allowing you to recover most or all of your initial investment.
Key Tips:
- Wait 6+ months (seasoning period) for most lenders
- Get a formal appraisal to confirm new value
- Shop multiple lenders for best rates
- Calculate new cash flow with higher loan amount
Repeat
Scale your portfolio
Use the recovered capital to purchase another property. Each successful BRRRR allows you to acquire more properties without needing new capital from savings.
Key Tips:
- Have your next deal lined up before refinancing
- Build relationships with contractors and lenders
- Systematize your process for faster scaling
- Track metrics to improve with each deal
BRRRR Deal Example with Numbers
Let's walk through a realistic BRRRR deal to see how the numbers work:
Sample BRRRR Deal
Initial Purchase
After Repair Value (ARV)
Result:
You now own a $180,000 property generating $1,500/month rent with only $3,000 of your own capital invested. The remaining $135,000 of your initial investment is now available to purchase your next BRRRR property!
| Metric | Traditional Buy | BRRRR |
|---|---|---|
| Total Capital Needed | $45,000 (25% down) | $3,000 left in deal |
| Cash-on-Cash (Year 1) | ~8% | 100%+ (infinite if $0 in deal) |
| Time to Scale | Save for next down payment | Immediate with recovered capital |
| Complexity | Low | Higher (rehab + refinance) |
When to Use BRRRR (and When Not To)
BRRRR Is Ideal When:
- You can find properties 20-30% below ARV
- You have reliable contractors
- You want to scale quickly
- Market rents support post-refinance cash flow
- You have access to short-term financing
Skip BRRRR When:
- •Properties sell at or above market value
- •You can't manage a rehab (time or skill)
- •Turn-key properties cash flow well
- •Interest rates make post-refi cash flow negative
- •You're just starting and prefer simplicity
Financing Options for BRRRR
BRRRR typically requires two rounds of financing: short-term for acquisition/rehab, then long-term refinance after stabilization.
Initial Acquisition (Short-Term)
Hard Money Loans
- • 65-75% of purchase + rehab
- • 10-15% interest rates
- • 6-12 month terms
- • Fast closing (1-2 weeks)
Private Money
- • Loans from individuals you know
- • Negotiable terms
- • 8-12% typical rates
- • More flexible than hard money
Refinance (Long-Term)
Conventional Loans
- • Best rates (6-8%)
- • 6-12 month seasoning required
- • 75% LTV typical
- • Limited to 10 financed properties
DSCR Loans
- • Qualify based on property income
- • No personal income docs needed
- • Slightly higher rates (7-9%)
- • No limit on number of properties
Seasoning Tip: Some lenders have “delayed financing” exceptions that allow cash-out refinance immediately if you paid cash for the property. Research lenders before starting your BRRRR to optimize your timeline.
Risks and How to Mitigate Them
Rehab Cost Overruns
Renovations often cost more than expected due to hidden issues, material costs, or contractor delays.
Mitigation: Add 20% contingency to rehab budget. Get detailed inspections before buying. Use fixed-price contracts with contractors.
Low Appraisal
If the property appraises below your expected ARV, you'll recover less capital.
Mitigation: Research comparable sales thoroughly. Be conservative with ARV estimates. Have backup capital in case you leave more in the deal than planned.
Extended Holding Time
Longer rehab times mean more interest payments on short-term loans and delayed rental income.
Mitigation: Create realistic timelines. Get contractors committed to schedules. Budget for extra holding costs.
Negative Cash Flow After Refinance
Higher loan amounts mean higher payments. Some BRRRR deals don't cash flow well after pulling capital out.
Mitigation: Run cash flow analysis with the projected refinance loan amount before buying. Only proceed if post-refi numbers work.
Best Markets for BRRRR Investing
BRRRR works best in markets where you can find distressed properties below value and rents support cash flow after refinancing. Look for:
Ideal Market Characteristics
- Affordable entry prices ($75K-$200K)
- Strong rent-to-price ratios
- Available distressed inventory
- Reliable contractor availability
- Landlord-friendly laws
Top BRRRR Markets
Analyze BRRRR Deals Instantly
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