How the BRRRR strategy works
BRRRR — Buy, Rehab, Rent, Refinance, Repeat — is the real estate investment strategy that turns a finite pool of capital into a repeating acquisition machine. The concept is simple: you buy a distressed property at a discount, force appreciation through rehab, stabilize it as a rental, then refinance at the new higher value and pull your original capital back out. That recycled capital goes into the next deal.
The difference between BRRRR and a standard buy-and-hold is the refinance step. A standard rental purchase keeps your down payment permanently tied up in that property. BRRRR returns that down payment (and ideally your rehab costs) through the cash-out refi, leaving you with a rental that generates cash flow, an equity stake, and your original capital available for the next acquisition.
The math behind a BRRRR deal
Model example: You find a distressed duplex listed at $120,000 in a market where stabilized duplexes trade at $200,000. You estimate $35,000 in rehab to get it there. Total all-in cost: $155,000 in a $200,000 ARV market — you're at 77.5% of ARV, which is workable.
You put 25% down ($30,000), close with $3,600 in closing costs, fund $35,000 in rehab, and carry $2,400 in holding costs over four months. Total cash in: $71,000. At stabilization, the property appraises at $200,000. A 75% LTV cash-out refi returns a $150,000 loan. Your original acquisition loan was $90,000. You receive $60,000 in cash-out proceeds. You've recycled 85% of your capital — $60,000 back out of $71,000 in. With $11,000 left in the deal, an 8% cash-on-cash return is still possible if cash flow reaches $880/year.
The 70% rule
The standard BRRRR underwriting benchmark is to buy at 70% of ARV minus rehab costs. If ARV is $200,000 and rehab is $35,000: maximum purchase price = ($200,000 × 0.70) − $35,000 = $105,000. This leaves room to close acquisition costs, carry holding costs, and still have enough spread for a 75% LTV refi to return most or all of your capital.
The 70% rule is conservative. Some investors run BRRRR at 75–80% of ARV by using bridge loans or hard money that allows rapid deployment, or by finding lenders who accept 80% LTV. Higher percentages mean less capital recycled and more cash left in the deal. Whether that's acceptable depends on your cash-on-cash return target for the capital that stays.
Finding BRRRR deals
BRRRR deals require buying below retail. The most common sources are: distressed MLS listings (days on market 60+, price reduced, "as is"), off-market direct mail campaigns to absentee landlords or estate attorneys, foreclosure auctions, wholesalers, and REO (bank-owned) properties. In a competitive market, BRRRR deals are harder to find and require higher volume outreach.
The rehab estimate is critical. Most BRRRR investors who lose money underestimate rehab by 20–40%. Use a licensed contractor estimate before closing. Budget 10–15% over the contractor estimate for surprises. Every dollar of unexpected rehab cost is a dollar less of recycled capital.
DSCR requirements at refinance
Lenders underwrite investment property cash-out refis on debt service coverage ratio (DSCR), not just LTV. The formula: DSCR = NOI ÷ Annual Debt Service. Most lenders require 1.20–1.25x. If your NOI is $14,400/year and your new mortgage is $13,000/year, DSCR is 1.11x — which many lenders won't approve regardless of LTV.
This means you need to underwrite both LTV and DSCR before committing to a BRRRR deal. If the rent doesn't support the debt service at the refinanced loan amount, you're stuck either with a lower loan (less capital recycled) or a property that can't be refinanced as planned.
Related calculators
Model ongoing returns with our cash-on-cash return calculator. Stress-test vacancy assumptions with our rental vacancy impact calculator. Compare to a standard purchase in our investment property calculator. Check your DSCR requirement with our DSCR calculator.