BRRRR Method Step-by-Step: From Purchase to Refinance

The BRRRR method—Buy, Rehab, Rent, Refinance, Repeat—is the most powerful strategy for building a large rental portfolio with limited capital. Done correctly, you can recycle the same down payment across multiple properties, effectively acquiring real estate with infinite returns.

This guide walks you through each step of the BRRRR process, from finding distressed properties to refinancing and repeating the cycle.

What Is the BRRRR Method?

BRRRR is a five-step [real estate investment](/blog/dscr-loan-fix-and-flip) strategy:

1. Buy - Purchase a distressed property below market value
2. Rehab - Renovate the property to increase its value
3. Rent - Find quality tenants and stabilize cash flow
4. Refinance - Pull your capital back out via [cash-out refinance](/blog/cash-out-refinance-guide)
5. Repeat - Use the recycled capital to buy the next property

The magic: If you execute properly, the refinance returns 100% (or more) of your invested capital, allowing you to own a cash-flowing asset with none of your own money left in the deal.

Why BRRRR Works

Traditional Buy-and-Hold Problem

Conventional [real estate investing](/blog/brrrr-strategy-guide) requires capital for each property:

• Property #1: $50,000 down payment
• Property #2: Another $50,000
• Property #3: Another $50,000

To own 10 properties, you'd need $500,000 in down payments.

The BRRRR Solution

With BRRRR, you reuse the same capital:

• Property #1: $50,000 invested → refinance and pull out $50,000
• Property #2: Same $50,000 invested → refinance and pull out $50,000
• Property #3: Same $50,000 invested → refinance and pull out $50,000

You can build a 10-property portfolio with just $50,000 in capital if you execute perfectly.

The catch: You must buy below market value and add value through renovations. This isn't passive investing—it's active value creation.

Step 1: Buy Below Market Value

The entire BRRRR strategy hinges on purchasing properties at a discount. You need enough equity cushion to refinance and recoup your capital.

The 70% Rule

A common guideline: pay no more than 70% of the after-repair value (ARV) minus repair costs.

Formula: Maximum Purchase Price = (ARV × 70%) - Repair Costs

Example:

• After-repair value: $200,000
• Estimated repairs: $30,000
• Maximum purchase: ($200,000 × 70%) - $30,000 = $110,000

This leaves a 30% equity cushion and ensures you can refinance at 75% LTV and still pull all your capital out.

Where to Find BRRRR Deals

1. MLS (Multiple Listing Service)

Don't dismiss the MLS. Distressed properties appear regularly, especially:

• Estate sales (heirs want quick sales)
• Foreclosures and short sales
• Properties sitting on the market 60+ days
• Homes with deferred maintenance

Use filters: "fixer upper," "handyman special," "cash only," "as-is"

2. Off-Market Strategies

• Direct mail campaigns - Target absentee owners, tired landlords, pre-foreclosures
• [Driving for dollars](/blog/driving-for-dollars-guide) - Drive neighborhoods and note distressed properties
• Wholesalers - Network with wholesalers who find deals but don't buy them
• Auctions - Foreclosure auctions, tax deed sales, estate auctions
• FSBO ([For Sale By Owner](/blog/fsbo-guide)) - Motivated sellers trying to avoid agent fees

3. Networking

• Join local real estate investing meetups
• Build relationships with agents who specialize in investment properties
• Connect with contractors who see distressed properties
• Attend foreclosure auctions to learn the market

Analyzing the Deal

Before you buy, verify the numbers work:

Components to calculate:

1. Purchase price - What you'll pay
2. Repair costs - Detailed estimate from contractors
3. After-repair value (ARV) - What it's worth after renovations
4. Refinance loan amount - Typically 75% of ARV
5. Total invested - Purchase price + repairs + closing costs + holding costs
6. Cash recovered at refinance - Refinance loan amount minus remaining purchase loan

Example walkthrough:

• Purchase price: $120,000
• Repairs: $35,000
• Purchase closing costs: $3,000
• Holding costs (6 months): $6,000
• Total invested: $164,000
• After-repair value: $220,000
• Refinance at 75% LTV: $165,000
• Remaining purchase loan: $96,000 (if you used 20% down on hard money)
• Cash out at refinance: $165,000 - $96,000 = $69,000

Capital recovered: $69,000 out of $164,000 invested = 42% recovered

This example doesn't meet the "infinite return" threshold. You'd need a better deal, lower repair costs, or higher ARV.

Target scenario (100% capital recovery):

• Purchase price: $100,000
• Repairs: $30,000
• Closing/holding costs: $10,000
• Total invested: $140,000
• After-repair value: $200,000
• Refinance at 75% LTV: $150,000
• Remaining purchase loan: $80,000
• Cash out: $150,000 - $80,000 = $70,000

Plus your original $60,000 down payment from hard money = $130,000 recovered (93% recovery rate). Close enough to infinite return.

Step 2: Rehab to Add Maximum Value

The rehab phase makes or breaks your BRRRR deal. Overspend and you can't refinance profitably. Under-renovate and the ARV doesn't hit your target.

Creating the Scope of Work

Before you buy, create a detailed scope of work (SOW) with your contractor.

Essential components:

• Itemized list of every repair/upgrade
• Cost estimate for each item
• Timeline for completion
• Payment schedule

High-ROI renovations for rental properties:

1. Kitchen updates - New cabinets (or paint existing), countertops, appliances, flooring
2. Bathroom updates - New vanity, toilet, flooring, fresh paint, updated fixtures
3. Flooring - Replace carpet with LVP (luxury vinyl plank), refinish hardwood
4. Paint - Entire interior, neutral colors (gray, greige, white)
5. Curb appeal - Landscaping, front door, house numbers, lighting
6. Mechanicals - HVAC, water heater, electrical panel (if needed)

Low-ROI renovations (avoid):

• High-end finishes (granite vs. quartz—tenants don't care)
• Swimming pools
• Luxury landscaping
• Over-improving for the neighborhood

Managing the Rehab

Option 1: General Contractor

• Pros: Less hands-on, one point of contact, they manage subs
• Cons: More expensive (20-30% markup), less control, quality varies

Option 2: Self-Manage with Subcontractors

• Pros: Lower costs, more control, faster learning
• Cons: Time-intensive, requires construction knowledge, you handle issues

Best practices:

• Get 3 bids for any job over $5,000
• Check licenses, insurance, and references
• Use a detailed contract with payment milestones
• Visit the job site at least 3x per week
• Don't pay in full until the job is complete
• Hold back 10% for punch list items

Staying on Budget

Rehabs almost always go over budget. Plan for 10-20% contingency.

Common budget-killers:

• Hidden issues (foundation, electrical, plumbing)
• Scope creep ("while we're at it, let's also...")
• Contractor delays and inefficiency
• Permit issues
• Material cost increases

Track expenses religiously:

• Use a spreadsheet or app (Rehab Manager, Propertyware)
• Save every receipt
• Update weekly
• Compare actual to estimate

Timeline targets:

• Cosmetic rehab: 4-6 weeks
• Medium rehab: 8-12 weeks
• Heavy rehab: 12-20 weeks

Every extra month adds holding costs (insurance, utilities, loan interest).

Step 3: Rent to Quality Tenants

Once the property is rehabbed, it's time to find tenants. This step is critical for two reasons:

1. Lenders require stabilized occupancy to refinance (usually 3-6 months of rent history)
2. Cash flow begins - You need rental income to cover the mortgage

Setting the Right Rent Price

Research comparable rentals:

• Zillow, Apartments.com, Rentometer
• Call 5-10 comparable listings and ask about amenities, lease terms, availability
• Drive by the comps (are they really comparable?)

Don't underprice to fill quickly. A $100/month discount costs $1,200/year. Wait an extra month for the right tenant at the right price.

Marketing Your Rental

Where to list:

• Zillow Rental Manager (free, syndicates to Trulia and HotPads)
• Facebook Marketplace
• Craigslist (still effective in many markets)
• Apartments.com
• Local property management company websites

Quality photos matter:

• Clean, decluttered space
• Natural light (open blinds, shoot during daytime)
• Wide-angle shots showing entire rooms
• Highlight best features (updated kitchen, backyard, etc.)

Write a compelling description:

• Lead with the best feature
• Use bullet points for easy scanning
• Mention nearby amenities (parks, schools, shopping)
• Include pet policy, lease terms, utilities included/excluded

[Tenant Screening](/blog/best-property-management-software-2026)

Don't skip this. Bad tenants will destroy your BRRRR profitability.

Minimum criteria:

• Credit score: 600+ (or strong rental history if below)
• Income: 3x monthly rent
• No evictions in the past 5 years
• No recent felonies (especially violent crimes or property damage)
• Positive references from previous 2 landlords

Use a tenant screening service:

• TurboTenant (free for basic reports)
• Cozy (free)
• TransUnion SmartMove ($35-40)
• RentPrep ($20-70 depending on report depth)

Application process:

1. Pre-screen with a quick phone call (income, pets, move-in timeline)
2. In-person showing (observe how they treat the property)
3. Formal application with fee ($30-50 to cover screening costs)
4. Run credit, background, and eviction check
5. Call previous landlords (not just current—they might lie to get rid of a bad tenant)
6. Verify employment and income

Red flags:

• Pressures you to skip screening
• Offers to pay several months upfront (often a scam)
• Bad-mouths previous landlords
• Can't provide references
• Employment or income doesn't match application

Lease Agreements

Use a state-specific lease agreement. Don't use generic templates from the internet.

Where to get one:

• State realtor association (often available for a small fee)
• Rocket Lawyer or LegalZoom ($30-100)
• Local attorney (most expensive but custom to your needs)

Key clauses:

• Rent amount and due date
• Late fee policy (typically $50-100 or 5% of rent after a 5-day grace period)
• Security deposit amount and terms
• Pet policy and pet deposit/fees
• Maintenance request procedures
• Renewal terms
• Early termination policy

Step 4: Refinance and Pull Your Capital Out

After the property is rented and stabilized (typically 3-6 months of rental history), it's time to refinance and recover your invested capital.

When to Refinance

Lender requirements typically include:

• Seasoning period: 6-12 months of ownership (some lenders allow immediate refinance with DSCR loans)
• Rental history: 3-6 months of on-time rent payments
• Appraisal: Property must appraise at or above your target ARV
• Credit score: 680+ for best rates
• Cash reserves: 6 months of mortgage payments in savings

Types of Refinance Loans

1. Conventional Cash-Out Refinance

• LTV limit: 75% for investment properties
• Rates: Typically best available rates
• Requirements: Good credit (680+), documented income, low DTI

2. DSCR (Debt Service Coverage Ratio) Loans

• LTV limit: 75-80%
• Rates: Slightly higher than conventional
• Benefits: No income verification (qualify based on rental income only)
• Best for: Self-employed or investors with high DTI

3. Portfolio Lenders

• LTV limit: Varies (sometimes up to 80%)
• Rates: Higher than conventional
• Benefits: Flexible underwriting, faster closing
• Best for: Investors with multiple properties or unique situations

The Refinance Process

Step 1: Shop lenders (1-2 weeks before you're ready)

Get quotes from:

• 3 local banks/credit unions
• 2 mortgage brokers
• 1-2 online lenders

Compare:

• Interest rates
• Closing costs
• Seasoning requirements
• LTV ratios

Step 2: Submit application

You'll need:

• Tax returns (past 2 years)
• W-2s or 1099s
• Bank statements (past 2 months)
• Lease agreement
• Rent payment history
• Property insurance
• Initial purchase documents

Step 3: Appraisal

The appraiser will visit and assess the after-repair value. They'll compare to similar sold properties (comps) in the area.

Pro tip: Prepare a "comp package" for the appraiser with recent sales of similar renovated properties. Some appraisers will consider it.

If the appraisal comes in low:

• Request a reconsideration with additional comps
• Pay for a second appraisal
• Accept a lower refinance amount (less capital recovered)
• Wait 6 months and try again (market might improve)

Step 4: Closing

Refinance closing is simpler than purchase closing:

• Sign documents
• Pay closing costs (typically $3,000-6,000)
• Old loan paid off
• Net proceeds deposited to your account

Timeline: 30-45 days from application to closing

Calculating Your Returns

After refinancing, evaluate your true returns.

Metrics to track:

1. Capital Recovered

Total invested vs. total returned at refinance

Example:

• Purchase + repairs + costs: $140,000
• Refinance cash out: $130,000
• Capital recovered: 93%

2. Cash-on-Cash Return

Annual cash flow ÷ capital left in the deal

Example:

• Annual cash flow: $4,800
• Capital left in deal: $10,000
• Cash-on-cash return: 48%

3. Total Return (including equity)

(Annual cash flow + annual principal paydown + annual appreciation) ÷ capital invested

Example:

• Annual cash flow: $4,800
• Annual principal paydown: $3,000
• Annual appreciation (3%): $6,000
• Total annual return: $13,800
• Capital invested: $10,000
• Total return: 138%

Step 5: Repeat the Process

You've now completed one full BRRRR cycle. You own a cash-flowing rental property with minimal capital remaining in the deal. Time to repeat.

Scaling Your BRRRR Portfolio

Year 1: Complete 1-2 BRRRR deals

• Learn the process
• Build contractor relationships
• Establish lender relationships
• Refine your systems

Year 2-3: Complete 3-5 deals per year

• Hire help (VA for marketing, project manager for rehabs)
• Standardize your processes
• Focus on finding better deals
• Improve efficiency

Year 4+: Scale to 5-10+ deals per year

• Build a team (acquisitions, project manager, property manager)
• Systemize everything
• Consider syndications or joint ventures for larger projects

Common Scaling Challenges

1. Running Out of Lending Capacity

Most conventional lenders cap you at 10 financed properties.

Solutions:

• Use commercial loans (no cap)
• Partner with other investors
• Pay off existing mortgages with cash-out refinances from new deals
• Use portfolio lenders

2. Capital Constraints

Even if you recover 90% of capital, the remaining 10% adds up.

Solutions:

• Bring in partners for capital (split equity)
• Use private money or hard money for purchases
• Improve deal quality (get closer to 100% capital recovery)

3. Time Management

You can't personally manage 20+ rehab projects.

Solutions:

• Hire a project manager or general contractor
• Create systems and checklists
• Focus on higher-level activities (deal finding, financing)

Advanced BRRRR Strategies

The BRRRR + House Hack Combo

Live in the property during the rehab (owner-occupied financing at 3.5% down), then move out after 12 months and do a cash-out refinance.

Benefits:

• Lowest possible down payment
• Best interest rates
• Tax benefits during occupancy

The Luxury BRRRR

Instead of C-class properties, BRRRR higher-end homes in B/A neighborhoods.

Benefits:

• Better tenants
• Higher rents
• More appreciation
• Easier financing

Challenges:

• Higher capital requirements
• Longer hold times
• More expensive mistakes

The BRRRR to Short-Term Rental

Complete the BRRRR process, then convert to Airbnb/VRBO instead of traditional rental.

Benefits:

• Higher cash flow (2-3x traditional rent in good markets)
• Flexibility to use property yourself

Challenges:

• More management intensive
• Zoning restrictions
• Income volatility

Common BRRRR Mistakes and How to Avoid Them

Mistake #1: Overpaying for the Property

Problem: You pay too much, leaving insufficient equity to refinance and recover capital.

Solution: Use the 70% rule strictly. Walk away from marginal deals. There's always another property.

Mistake #2: Underestimating Repair Costs

Problem: Rehab costs $20,000 more than estimated, destroying your returns.

Solution:

• Get detailed bids from contractors before you buy
• Add 15-20% contingency
• Inspect thoroughly during due diligence
• Learn basic construction estimating

Mistake #3: Over-Improving the Property

Problem: You install granite counters and hardwood floors in a C-class neighborhood. Appraisal doesn't support the investment.

Solution: Match finishes to the neighborhood and rental market. Tenants care about clean and functional, not luxury.

Mistake #4: Extending the Rehab Timeline

Problem: A 2-month rehab becomes 6 months. Holding costs explode.

Solution:

• Set firm deadlines with contractors
• Visit job site frequently
• Have backup contractors ready
• Penalize delays in your contract

Mistake #5: Skipping Tenant Screening

Problem: You rush to get the property rented to start the refinance clock. You accept a marginal tenant. They trash the place and don't pay rent.

Solution: Never compromise on tenant quality. An extra month of vacancy is cheaper than a bad tenant.

Mistake #6: Refinancing Too Early

Problem: You refinance before the property is truly stabilized. Lender requires 6 months of rental history; you only have 3.

Solution: Confirm lender requirements before you start the process. Wait until you meet all criteria.

Mistake #7: Not Planning for Taxes

Problem: You pull out $80,000 in a refinance, then get hit with a huge tax bill.

Solution: Refinances are NOT taxable (it's borrowed money, not income). But consult a CPA to structure your investments tax-efficiently.

BRRRR Financing Options

Hard Money Loans

Terms:

• Interest rates: 10-15%
• Points: 2-4% of loan amount upfront
• LTV: 65-75% of purchase price
• Loan term: 6-12 months

Best for: Short-term financing during acquisition and rehab, then refinance to conventional.

Private Money

Terms: Negotiable (typically 6-12% interest, interest-only payments)

Best for: Investors with strong networks willing to lend on real estate deals

How to find private money:

• Friends and family
• Networking at real estate events
• [Self-directed IRA](/blog/dscr-loan-self-directed-ira) investors
• Wealthy individuals looking for passive returns

DSCR Loans for Purchase

Some lenders offer DSCR loans for purchase (not just refinance), allowing you to skip conventional financing entirely.

Benefits:

• No income verification
• Qualify based on rental income
• Close faster

Drawbacks:

• Higher rates (1-2% above conventional)
• Lower LTV (sometimes 75-80%)

Cash Purchases

If you have sufficient capital, buying with cash simplifies the process.

Benefits:

• Faster closings (7-14 days)
• Stronger negotiating position
• No loan fees or interest during rehab

Drawbacks:

• Ties up significant capital
• Lower overall returns (not leveraging)

FAQ

How much money do I need to start BRRRRing? Minimum $30,000-50,000 for purchase down payment, closing costs, rehab, and reserves. Hard money can reduce the cash needed upfront.

Can I BRRRR with an FHA loan? Not effectively. FHA loans require owner occupancy for 12 months and have strict refinance restrictions. Use FHA for house hacking, not BRRRR.

How long does a full BRRRR cycle take? 6-12 months on average: 30 days to close, 2-3 months for rehab, 3-6 months to stabilize rental, 45 days to refinance.

What if the appraisal comes in low? Request reconsideration with better comps, wait 6 months and reapply, or accept less capital recovery.

Can I BRRRR in expensive markets like California? Yes, but the numbers are harder. You need deeper discounts and stronger value-add strategies. Many investors BRRRR in lower-cost markets instead.

Do I need to form an LLC? Not required, but recommended once you have 2-3 properties for liability protection. Some lenders won't refinance properties in LLCs; consult your lender first.

What happens if I can't rent the property? You're stuck with holding costs until you find a tenant. This is why market research before buying is critical.

Can I BRRRR condos? Sometimes. Condo financing is stricter (lenders require the complex to be "warrantable"), and appreciation might be limited. Single-family and small multifamily are easier.

Should I use a property manager? Not necessary during the BRRRR process, but once you scale to 5+ properties, property management (8-10% of rent) frees your time for more deals.

What's a good cash-on-cash return after BRRRR? If you recover 90%+ of your capital, even 10-15% cash-on-cash is excellent because you have minimal capital invested. Anything over 20% is phenomenal.

Related Articles

• Using a HELOC as a Down Payment for Rental Property
• [Best College Towns for [Rental Property Investment](/blog/best-states-for-rental-property-investment-2026)](/blog/best-college-towns-for-rental)
• How to Identify the Best Neighborhoods for Rental Property Investment (Data-Driven Approach)