The BRRRR Method Explained
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. You buy a property below its value, renovate it, rent it out, then refinance based on the higher value to get your cash back for the next deal.
How the numbers work
- Buy with cash or a short-term (hard money) loan.
- Rehab to raise the value and make it rentable.
- Rent it to a qualified tenant.
- Refinance into a long-term loan, usually 70–75% of the new appraised value.
- Repeat with the cash you pulled out.
A worked example
Buy for $150,000, spend $40,000 on rehab and $6,000 on closing costs: $196,000 in. After repairs it appraises at $260,000. A 75% refinance is $195,000, so nearly all of your money comes back, and you still own a rental.
The deal is made when you buy. If 75% of the ARV doesn't cover your purchase, rehab and costs, you'll leave cash in the deal.
Mistakes to avoid
- Overestimating the appraisal. Lenders' appraisers are conservative.
- Forgetting the seasoning period: many lenders require 3–6 months of ownership before a cash-out refinance.
- Ignoring cash flow after the new, larger loan payment.