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How the BRRRR Method Works

The BRRRR Strategy Explained

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It is the most popular strategy for building a rental portfolio with limited capital because it allows you to recycle your down payment from deal to deal.

Instead of leaving your cash locked in one property forever, BRRRR lets you pull most or all of it back out through a cash-out refinance, then redeploy that capital into the next acquisition.

The Five Steps

Step 1: Buy
Acquire a property below market value. BRRRR works best when you purchase at a discount, typically 20% to 30% below the after-repair value (ARV). Common sources include foreclosures, wholesalers, off-market deals, and distressed sellers. Many investors use hard money or private loans for the initial purchase since the property may not qualify for conventional financing in its current condition.

Step 2: Rehab
Renovate the property to increase its value and make it rent-ready. Focus on improvements that add the most value per dollar: kitchens, bathrooms, flooring, paint, and curb appeal. The goal is to force appreciation so the property appraises at or above your target ARV. Keep detailed records of all renovation costs and timelines.

Step 3: Rent
Place a qualified tenant and establish stable rental income. Lenders will want to see an active lease or market rent documentation when you apply for the refinance. Screen tenants thoroughly: credit check, income verification, rental history, and references.

Step 4: Refinance
Once the property is renovated and rented, refinance into a long-term loan based on the new appraised value. A DSCR loan is often the best fit here because it qualifies based on the property’s rental income rather than your personal tax returns. If the property appraises at or above your total investment (purchase + rehab + closing costs), you can pull out most or all of your original capital.

Step 5: Repeat
Take the recovered capital and acquire the next property. Each successful BRRRR cycle adds a cash-flowing rental to your portfolio while freeing up your investment capital for the next deal.

Example BRRRR Deal

  • Purchase price: $150,000
  • Rehab cost: $35,000
  • Total investment: $185,000
  • After-repair value (ARV): $240,000
  • Refinance at 75% LTV: $180,000
  • Cash left in deal: $5,000
  • Monthly rent: $1,800
  • Monthly mortgage after refi: $1,260

In this example, you recovered $180,000 of your $185,000 investment, leaving only $5,000 in the deal. The property cash flows approximately $540/month before expenses, and you have $180,000 to deploy into the next acquisition.

Key Risks to Manage

  1. Rehab cost overruns: Always budget 10%-20% contingency above your contractor’s estimate.
  2. Appraisal comes in low: If the ARV appraises below your target, you may leave more cash in the deal than planned.
  3. Holding costs during rehab: Hard money interest, insurance, and taxes add up. Move quickly through renovation.
  4. Tenant placement delays: Vacancy during the rent phase reduces cash flow and delays the refinance.

Model Your BRRRR Deal

Our free BRRRR calculator walks you through every stage of the strategy and shows your cash-out amount, equity position, and cash flow.

Try the FAAS Funding BRRRR Calculator

Need financing for the refinance step? Get pre-qualified for a DSCR loan.

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FAAS Funding LLC is a business-purpose and investment property financing marketplace and is not a consumer mortgage lender. Loans are for investment properties only and not for primary residence financing. Programs are subject to underwriting guidelines and investor approval. NMLS Consumer Access

Frequently Asked Questions

What does BRRRR stand for?
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It is a real estate investment strategy that allows investors to recycle capital across multiple deals.
How does the refinance step work in BRRRR?
After rehabbing and renting the property, you do a cash-out refinance based on the new appraised value. This pulls out most or all of your initial investment to use on the next deal.
What type of loan is best for the BRRRR refinance?
DSCR loans are ideal for the refinance step because they qualify based on rental income rather than personal income, making it easier to scale.
How much equity do I need for a BRRRR refinance?
Most lenders require at least 20-25% equity after rehab. The more value you add during renovation, the more cash you can pull out.
Can beginners use the BRRRR strategy?
Yes. BRRRR works for beginners, but it requires careful deal analysis. Each step must be planned before purchasing to ensure the numbers work.
How long should I wait before refinancing a BRRRR property?
Most lenders require a 3-6 month seasoning period after purchase before allowing a cash-out refinance at the new appraised value.
What is the biggest risk with BRRRR?
The biggest risk is overestimating the after-repair value or underestimating rehab costs, which can leave capital trapped in the deal.
Does BRRRR work in expensive markets?
BRRRR can work in any market, but it is easier in markets where purchase prices are below replacement cost and rents support strong DSCR ratios.
How many BRRRR deals can I do at once?
With DSCR loans, there is no limit on the number of financed properties. You can scale as fast as you find qualifying deals.
What DSCR do I need for a BRRRR refinance?
Most lenders require a minimum DSCR of 1.0 to 1.25 for the refinance step. Higher DSCR ratios qualify for better rates and terms.
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