The BRRRR method, demystified
BRRRR (Buy, Rehab, Rent, Refinance, Repeat) is a way to recycle your capital: buy and improve a property below value, rent it, then do a cash-out refinance, typically up to 75% of the after-repair value, to pull most or all of your cash back out and do it again.
BRRRR is how investors build a portfolio without fresh cash for every deal. Done well, you recycle the same down payment over and over. Done carelessly, your cash gets stuck in a string of properties. The difference is entirely in the numbers.
The five steps
- Buy below market, usually a property that needs work, often with short-term or cash financing.
- Rehab to force the value up and make it rent-ready.
- Rent it to a qualified tenant so it shows income.
- Refinance into a long-term loan based on the new, higher value.
- Repeat with the cash the refinance returns.
The math that makes it work
The key numbers are your all-in cost (purchase plus rehab) versus the new loan after the rehab. Lenders refinance a percentage of the after-repair value (ARV); 75% is the consensus norm for investment property, and most require a seasoning period of 6 to 12 months before they will use the new appraised value.
A worked example
You buy at $180,000 and spend $45,000 on rehab, all-in for $225,000. The finished home appraises at an ARV of $300,000. Your lender refinances at 75% LTV, a $225,000 loan.
That is the BRRRR dream: the refinance returns all your capital, you still own a cash-flowing rental, and you carry your down payment to the next deal. If the ARV had come in at $260,000, the refinance would return only $195,000 and leave $30,000 trapped.
Where BRRRR breaks
- The ARV comes in low. The appraisal is the linchpin and the most common way BRRRR disappoints.
- The rehab runs over. Overruns raise your all-in cost without raising the refinance, landing on your trapped cash.
- The refinance DSCR is too low. The new rent still has to cover the new loan, or the lender caps your cash-out.
- Rates rise before you refinance. A higher refinance rate can turn cash flow negative even when the cash-out works.
Frequently asked questions
How much can I refinance out in a BRRRR?
Most investment-property cash-out refinances cap at about 75% of the after-repair value. If your all-in cost is at or below that figure, you can recover most or all of your cash.
How long until I can refinance (the seasoning period)?
Most lenders require a seasoning period of 6 to 12 months before they will refinance based on the new appraised value rather than your purchase price. Six months is the most common.
What happens if the appraisal comes in low?
A low ARV shrinks the refinance, so some of your cash stays trapped in the deal. This is the biggest BRRRR risk, which is why you should underwrite ARV conservatively using sold comparables.
Is BRRRR still viable with higher interest rates?
Yes, but the margins are tighter. Higher refinance rates mean a larger payment, so the rent has to support it and you may recover less cash. Model the full cycle before you buy.