The BRRRR method (Buy–Rehab–Rent–Refi–Repeat) is a disciplined way to turn underperforming properties into cash-flowing assets—without leaving all your capital trapped in each deal. This guide shows the steps, the math, the pitfalls, and exactly what lenders look for.
Quick facts
- The BRRRR method works best in markets where you can buy at a discount, create value with rehab, and stabilize rents quickly.
- Two numbers to master: After-Repair Value (ARV) and all-in cost (purchase + rehab + closing + carry).
- Most cash-out refis on investment property cap LTV and may require seasoning; rules vary by lender and program.
- Paperwork wins: detailed scope, licensed bids, rent comps, and clean before/after photos speed underwriting.
BRRRR method, in plain English
Buy below market, renovate to your target tenant, rent at market, refinance to pull some (not always all) cash back, then repeat. The BRRRR method isn’t magic; it’s a project plan plus conservative math.
The 7 steps (and what can go wrong)
Step 1 — Buy: define your strike zone
Work backward from the ARV and your target loan amount. Your maximum offer should leave room for rehab, closing, carry, and a profit/cushion. Don’t buy a problem you can’t fix inside your capital and timeline.
Step 2 — Rehab: value over granite
Renovate for rent-ready durability, not HGTV. Kitchens/baths, roofs/HVAC, safety, and water issues top the list. Keep a tight scope and contingency. If you need financing for repairs, know that FHA 203(k) exists (mostly for owner-occupied) and that investors often rely on hard-money or renovation loans.
Step 3 — Rent: stabilize, then document
Target a rent backed by comps and neighborhood demand. Aim for clean leases, deposits collected, and a short vacancy. Keep a full rent file for underwriting.
Step 4 — Refi: set expectations early
Different lenders = different rules for investment properties: maximum LTVs for cash-out, minimum credit scores, reserve requirements, DSCR thresholds, and potential seasoning periods. Ask about appraisals using ARV vs “as-is,” and whether delayed financing exceptions apply when you bought with cash.
Step 5 — Repeat: recycle intelligently
Don’t chase speed. Stack a small cash buffer from each deal to avoid a liquidity crash when a repair or vacancy hits.
Step 6 — Track operations
After the refi, you still have a business to run: maintenance cadence, tenant service, insurance renewals, tax protests, and rent reviews. Good ops = lower surprises.
Step 7 — Review the portfolio
Re-underwrite annually. If rates drop or NOI rises, a refi may free capital; if taxes/insurance jump, your next “repeat” may be deferred.
The core formulas
ARV = After-repair value estimated from comps (adjusted for bed/bath/condition/sq ft/time)
All-in cost = Purchase + Rehab + Closing + Carry
Equity created = ARV − All-in cost
Cash-out refi proceeds ≈ (ARV × LTV) − New loan costs − Payoff (if any)
4 real-world examples (numbers rounded)
Example A — Baseline success
- Purchase $220,000 (cash); Rehab $35,000; Closing+Carry $7,000 → All-in $262,000
- ARV $320,000 → Paper equity $58,000
- Refi (investment, cash-out) at 70% LTV → New loan ≈ $224,000
- Cash back ≈ $224,000 − $0 payoff − $6,000 costs = $218,000 (you still have $44,000 left in the deal)
- Rent $2,400/mo; Expenses (tax+ins+maint+mgmt) $750/mo; P&I @ 6.5% ≈ $1,415/mo → Cash flow ≈ $235/mo
Takeaway: solid. You didn’t get all your cash back, but cash flow is positive and equity remains.
Example B — Over-budget rehab
- All-in climbs to $278,000; ARV unchanged $320,000 → Equity shrinks to $42,000
- At the same 70% LTV, loan ≈ $224,000; cash left in deal increases to ≈ $60,000; cash flow tightens
Takeaway: contingency matters. The BRRRR method breaks when scopes creep.
Example C — Rent surprise & insurance spike
- Rent reality $2,250 (not $2,400); insurance +$60/mo → NOI lower by ≈ $270/mo
- Cash flow approaches breakeven; refi still ok but cushion is thin
Takeaway: underwrite with conservative rent comps and current insurance quotes.
Example D — Rate shock
- Refi rate 7.4% instead of 6.5% → P&I +$180/mo
- Cap rate on ARV may look fine, but post-refi cash flow dips
Takeaway: always run ±100–200 bps rate sensitivity before you buy.
Lender checklist for the refi
- Seasoning & “delayed financing”: Many programs require a waiting period for cash-out unless a delayed-financing exception applies when you bought with cash. Ask early and document provenance of funds.
- LTV caps for investment property: Expect lower LTVs for cash-out than for primary homes. Check current matrices and be conservative in your model.
- DSCR focus: Some lenders target a minimum DSCR (e.g., ≥1.20× on the subject property) before approving terms.
- Reserves & multiple properties: If you hold several financed properties, expect extra reserves and documentation.
- Appraisal method: Be clear whether the appraisal will reflect stabilized ARV or rely on as-is value plus documented improvements.
Templates you can copy
Use these simple tables directly in WordPress or export them to a sheet. The BRRRR method rewards clear inputs.
Deal Analyzer (paste values)
| Item | Amount |
|---|---|
| Purchase price | $ |
| Rehab budget | $ |
| Closing & carry | $ |
| All-in cost | $ |
| Estimated ARV | $ |
| Estimated equity (ARV − All-in) | $ |
| Target refi LTV (e.g., 70%) | % |
| Projected new loan (ARV × LTV) | $ |
| Projected cash back (after costs) | $ |
Common pitfalls (and how to avoid them)
- Counting ARV chickens early: Base ARV on closed comps in the last 3–6 months, adjusted by a licensed appraiser/broker—not listing prices.
- Ignoring insurance and taxes: Both can erase cash flow. Get quotes and check tax reassessment assumptions before you buy.
- Scope creep: Lock materials and finishes before demo. Add a 10–15% contingency for unknowns.
- Over-leverage: The BRRRR method is fragile when you stretch LTV or underestimate vacancy.
- Weak documentation: Keep a project binder: scope, bids, permits, photos, receipts, leases, and rent ledger.
Common Questions
Do I need perfect credit? No, but better credit and lower DTI help you qualify for refi terms that make the numbers work.
How long until I can cash-out? It depends on the lender and program. Some require seasoning; “delayed financing” exceptions may apply to cash purchases—ask up front.
Can I use hard money to start? Many do, then refi into longer-term debt. Model the interest/carry carefully.
Related reads on Bulktrends
- Cap Rate vs Cash-on-Cash Return
- Real Estate Investing for Beginners
- DSCR Loans: Requirements, Rates & Examples
- 1031 Exchange Rules: Timelines & Pitfalls
Authoritative sources & further reading
- HUD — 203(k) Rehab Program (overview)
- Fannie Mae — Eligibility Matrix (cash-out/seasoning & delayed financing)
- Freddie Mac — Cash-Out Refinance (overview)
- CFPB — Cash-Out Refinance (research blog)
- IRS — Publication 527 (Residential Rental Property)
Educational content, not financial, tax, or legal advice. Lending rules change—confirm current terms with your lender and advisor before acting.
