BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. The goal is to buy a property below its potential value, force appreciation through renovation, then refinance based on the new value so you can pull most of your cash back out and do it again.
The Five Steps
- Buy a property that needs work, at a price that leaves room for profit. Many investors buy with cash, hard money, or another short-term loan.
- Rehab the property to raise its after-repair value (ARV). Focus on improvements that appraisers and tenants value.
- Rent it to a qualified tenant. A signed lease and rent history strengthen your refinance.
- Refinance into a long-term loan based on the new appraised value. Many lenders cap investment-property cash-out refinances at around 70% to 80% of value, and many require a seasoning period of ownership first.
- Repeat using the capital you recovered.
A Worked Example
- Purchase price: $120,000
- Rehab: $40,000
- Closing and holding costs: $10,000
- All-in cost: $170,000
- After-repair value (ARV): $230,000
- Refinance at 75% loan-to-value: $172,500
- Refinance closing costs: about $5,000
Net refinance proceeds of about $167,500 against a $170,000 all-in cost leaves roughly $2,500 of your cash still in the deal. That's close to a full recovery.
The Step Most Investors Rush: Cash Flow After the Refi
Pulling your money out only works if the property still cash flows on the new, larger loan. In this example, $172,500 at 7.5% for 30 years is about $1,206 per month in principal and interest, before taxes, insurance, repairs, vacancy, and management. If rent can't cover all of that with room to spare, you've recovered your cash but bought yourself a monthly problem.
Where BRRRR Deals Go Wrong
- The appraisal comes in low. Base your ARV on solid, recent comps, not hope.
- The rehab runs over budget or schedule. Every extra month adds holding costs.
- Rates rise between purchase and refinance. Stress-test your numbers at a higher rate.
- Seasoning rules delay the refinance. Talk to your refinance lender before you buy.
Run a BRRRR Deal
The BRRRR Strategy Interactive Workbook walks you from purchase through refinance and shows how much cash stays in the deal. New to deal math? Read How to Analyze a Rental Property and try the free Investor Deal Worksheet. For multiple strategies, see the Advanced Investor Strategy Bundle.
Written by Marchelle Cook, a Realtor for 26 years and a real estate investor and property manager since 2012. This article is for educational purposes only and is not financial, tax, or legal advice. Loan terms vary by lender.
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