BRRRR Method Explained: Buy, Rehab, Rent, Refinance, Repeat
The BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) is one of the most powerful strategies for building a rental property portfolio quickly. By recycling your capital through refinancing, you can acquire multiple properties using the same initial investment. The difference between traditional buy-and-hold and BRRRR can mean building a 10-property portfolio in 5 years instead of 20 years.
This comprehensive guide covers everything you need to know about the BRRRR method. We'll explain each step in detail, show you how to find the right properties, calculate rehab costs, secure financing, and execute the strategy successfully. Whether you're new to real estate investing or looking to accelerate your portfolio growth, this guide will help you master the BRRRR method.
1 / What is the BRRRR Method?
Understanding the BRRRR method and how it works is the foundation for successful execution.
BRRRR method definition
BRRRR Stands For:
- Buy: Purchase undervalued property
- Rehab: Renovate to increase value
- Rent: Lease to tenant for income
- Refinance: Pull out equity through cash-out refi
- Repeat: Use recovered capital for next property
The Goal:
- Recycle capital through refinancing
- Build portfolio with same initial investment
- Rapid portfolio growth
- Maximize leverage
How BRRRR works
Traditional Buy-and-Hold:
- Buy property with $40,000 down
- Property worth $200,000
- Have $40,000 tied up
- Need another $40,000 for next property
- Slow growth
BRRRR Method:
- Buy property for $100,000 (needs work)
- Rehab for $30,000
- Total investment: $130,000
- Property now worth $200,000
- Refinance 75% LTV: $150,000
- Recover: $130,000 (original investment)
- Have $20,000 profit + property
- Use $130,000 for next property
- Repeat with same capital
Why BRRRR is powerful
Capital Efficiency:
- Recycle same capital multiple times
- Don't need new capital for each property
- Faster portfolio growth
- Maximize leverage
Value Creation:
- Create value through rehab
- Force appreciation
- Increase property value
- Build equity quickly
Cash Flow:
- Rental income from day one
- Positive cash flow
- Passive income
- Portfolio income
Portfolio Growth:
- Build portfolio rapidly
- Multiple properties quickly
- Compound returns
- Wealth building
Key Insight: The BRRRR method is like having a money-printing machine. You use the same capital to buy multiple properties by creating value through rehab and pulling it back out through refinancing. The key is finding the right properties and executing rehabs that add real value.
2 / Step 1: Buy - Finding the Right Property
The first step is finding the right property. This is critical because the entire strategy depends on finding undervalued properties that can be rehabbed for profit.
What makes a good BRRRR property
Undervalued:
- Below market value
- Needs work (cosmetic or structural)
- Distressed seller
- Motivated seller
- Opportunity to add value
Rehab Potential:
- Can be improved significantly
- Rehab costs less than value added
- Good location
- Solid structure
- Worth fixing
Rental Potential:
- Will rent well after rehab
- Good rental market
- Desirable area
- Strong demand
- Good cash flow potential
Refinance Potential:
- Will appraise well after rehab
- Lenders will finance
- Meets LTV requirements
- Can pull out capital
Where to find BRRRR properties
Distressed Properties:
- Foreclosures
- Short sales
- Probate sales
- Divorce sales
- Estate sales
Off-Market Properties:
- Direct mail campaigns
- Driving for dollars
- Networking
- Wholesalers
- Real estate agents
Online Sources:
- Zillow
- Realtor.com
- Auction sites
- Wholesale websites
- Facebook groups
Networking:
- Real estate investors
- Wholesalers
- Real estate agents
- Contractors
- Property managers
Analyzing BRRRR deals
The 70% Rule:
- Maximum purchase price = (After Repair Value × 70%) - Rehab Costs
- Ensures profit margin
- Accounts for holding costs
- Leaves room for error
Example:
- ARV: $200,000
- 70% of ARV: $140,000
- Rehab: $30,000
- Max purchase: $110,000
- Target purchase: $100,000-$110,000
Key Numbers:
- ARV (After Repair Value): What it's worth after rehab
- Purchase Price: What you pay
- Rehab Costs: Cost to renovate
- Total Investment: Purchase + Rehab
- Refinance Amount: What you can refinance (75% of ARV)
- Capital Recovery: Refinance - Total Investment
Deal Analysis:
- Purchase: $100,000
- Rehab: $30,000
- Total: $130,000
- ARV: $200,000
- Refinance (75%): $150,000
- Recovery: $150,000 - $130,000 = $20,000 profit
- Plus you own the property!
Making offers
Offer Strategy:
- Start below target price
- Negotiate aggressively
- Use inspection contingencies
- Be ready to walk away
- Have multiple deals in pipeline
Financing Offers:
- Cash offers (if possible)
- Quick closing
- Fewer contingencies
- More attractive to sellers
- May get better price
Due Diligence:
- Inspect property thoroughly
- Verify rehab costs
- Check comps for ARV
- Confirm rental potential
- Verify refinance potential
3 / Step 2: Rehab - Adding Value Strategically
The rehab is where you create value. Strategic renovations that add the most value for the least cost are key to BRRRR success.
Rehab strategy
Value-Add Focus:
- Focus on improvements that add value
- Avoid over-improving
- Stay within budget
- Maximize ROI on each improvement
ROI Priorities:
- High ROI: Kitchen, bathrooms, flooring
- Medium ROI: Paint, lighting, fixtures
- Low ROI: Landscaping, luxury items
- Focus on high ROI improvements
Rental-Focused:
- Durable materials
- Easy to maintain
- Attractive to tenants
- Functional improvements
- Avoid luxury finishes
Common rehab items
Cosmetic Improvements:
- Paint (interior and exterior)
- Flooring (LVP, tile, carpet)
- Lighting fixtures
- Hardware and fixtures
- Window treatments
- Landscaping
Functional Improvements:
- Kitchen updates
- Bathroom updates
- HVAC system
- Plumbing updates
- Electrical updates
- Roof repairs
Structural Improvements:
- Foundation repairs
- Structural issues
- Major systems
- Only if necessary
- High cost, low ROI
Budgeting for rehab
Rehab Budget Components:
- Materials
- Labor
- Permits
- Inspections
- Contingency (10-20%)
- Holding costs
Budget Example:
- Kitchen: $8,000
- Bathrooms: $6,000
- Flooring: $4,000
- Paint: $3,000
- Electrical/Plumbing: $4,000
- Other: $3,000
- Contingency (15%): $4,200
- Total: $32,200
Staying on Budget:
- Get multiple quotes
- Track expenses closely
- Avoid scope creep
- Have contingency
- Monitor progress
Managing the rehab
Contractor Selection:
- Get multiple bids
- Check references
- Verify licenses
- Review contracts carefully
- Set clear expectations
Project Management:
- Regular site visits
- Track progress
- Monitor budget
- Address issues quickly
- Maintain timeline
Quality Control:
- Inspect work regularly
- Ensure quality standards
- Fix problems immediately
- Don't accept poor work
- Protect your investment
Timeline:
- Set realistic timeline
- Account for delays
- Factor in holding costs
- Minimize vacancy time
- Get to rental quickly
4 / Step 3: Rent - Generating Income
Once rehabbed, the property needs to be rented quickly to start generating income and qualify for refinancing.
Preparing for rent
Property Readiness:
- Complete all rehab work
- Clean thoroughly
- Make move-in ready
- Address any issues
- Professional appearance
Marketing:
- Professional photos
- Compelling listing
- Multiple platforms
- Quick response
- Showings available
Pricing:
- Market rate rent
- Competitive pricing
- Quick to rent
- Quality tenants
- Maximize income
Tenant screening
Screening Process:
- Application review
- Credit check
- Income verification
- Background check
- Rental history
- References
Quality Tenants:
- Good credit (650+)
- Income 3x rent
- Stable employment
- Good rental history
- No evictions
- Responsible
Why It Matters:
- Need stable tenant for refinancing
- Lenders look at rental income
- Quality tenants = less problems
- Protects investment
Lease agreement
Standard Lease:
- Clear terms
- Rent amount
- Lease duration
- Responsibilities
- Rules and regulations
- Legal compliance
Important Terms:
- Rent amount and due date
- Security deposit
- Maintenance responsibilities
- Pet policy
- Early termination
- Renewal options
Legal Compliance:
- State and local laws
- Fair Housing compliance
- Habitability requirements
- Legal review recommended
Rental income
Income Requirements:
- Need rental income for refinancing
- Lenders verify income
- Lease agreement required
- Proof of payment
- Stable tenant preferred
Documentation:
- Signed lease
- Security deposit receipt
- First month rent
- Tenant information
- Property condition report
5 / Step 4: Refinance - Recovering Your Capital
The refinance step is where you recover your capital. This is critical for repeating the process.
Refinance timing
When to Refinance:
- After property is rented
- After rehab is complete
- After 6-12 months (some lenders)
- When property value is established
- When ready for next property
Lender Requirements:
- Property must be rented
- Lease agreement required
- Property condition good
- Appraisal required
- Income verification
Timeline:
- Rehab: 2-3 months
- Rent: 1-2 months
- Refinance: 1-2 months
- Total: 4-7 months per property
Refinance options
Cash-Out Refinance:
- Refinance to 70-75% of ARV
- Pull out equity
- Recover capital
- Use for next property
Example:
- ARV: $200,000
- Refinance 75%: $150,000
- Total investment: $130,000
- Cash-out: $20,000
- Recovered: $130,000 + $20,000 profit
Rate and Term:
- Lower rate if possible
- Better terms
- May not pull out all capital
- Still beneficial if rate is better
Lender requirements
Property Requirements:
- Must be in good condition
- Must be rented
- Must appraise at value
- Must meet lender standards
Financial Requirements:
- Credit score (680+)
- Debt-to-income ratio
- Loan-to-value (70-75%)
- Rental income verification
Documentation:
- Lease agreement
- Rental income proof
- Property appraisal
- Financial documents
- Property information
Appraisal considerations
Appraisal Process:
- Lender orders appraisal
- Appraiser inspects property
- Compares to similar properties
- Determines value
- Must meet ARV estimate
Ensuring Good Appraisal:
- Property in excellent condition
- Comparable properties support value
- Market conditions favorable
- Appraiser sees value
- Provide comps if helpful
If Appraisal Low:
- Challenge if justified
- Provide additional comps
- Renegotiate if needed
- May need to adjust strategy
- Consider alternative lenders
Recovering capital
Capital Recovery Calculation:
- Refinance amount: $150,000
- Total investment: $130,000
- Capital recovered: $130,000
- Profit: $20,000
- Ready for next property
Using Recovered Capital:
- Down payment on next property
- Rehab costs for next property
- Reserves
- Portfolio growth
Pro Tip: The goal is to recover 100% of your capital (or more) through refinancing. This allows you to repeat the process with the same initial investment. If you can't recover your capital, the deal may not work for BRRRR.
6 / Step 5: Repeat - Scaling Your Portfolio
The repeat step is where you scale. Use recovered capital to buy the next property and repeat the process.
Using recovered capital
Next Property:
- Use recovered capital for down payment
- Use for rehab costs
- Maintain reserves
- Start next BRRRR cycle
Capital Efficiency:
- Same capital used multiple times
- Build portfolio rapidly
- Maximize leverage
- Compound returns
Example Cycle:
- Property 1: $130,000 investment → Recover $150,000
- Property 2: $130,000 investment → Recover $150,000
- Property 3: $130,000 investment → Recover $150,000
- 3 properties with $130,000 initial capital
Scaling strategy
Systematic Approach:
- Have next property identified
- Pipeline of deals
- Ready to move quickly
- Efficient process
- Minimize downtime
Deal Pipeline:
- Always looking for deals
- Multiple properties in pipeline
- Ready to move on next one
- Don't wait between properties
- Maintain momentum
Systems and Processes:
- Refined processes
- Efficient systems
- Team in place
- Contractors ready
- Lenders established
Managing multiple properties
Property Management:
- Manage properties efficiently
- Systems for each property
- Quality tenants
- Maintenance systems
- Financial tracking
Financial Management:
- Track each property
- Monitor cash flow
- Manage debt
- Track refinancing
- Portfolio analysis
Time Management:
- Efficient processes
- Delegate when needed
- Focus on high-value activities
- Systematize routine tasks
- Scale operations
Portfolio growth
Growth Timeline:
- Year 1: 2-3 properties
- Year 2: 4-6 properties
- Year 3: 7-10 properties
- Year 4: 11-15 properties
- Year 5: 16-20+ properties
Factors Affecting Growth:
- Capital availability
- Deal flow
- Rehab capacity
- Refinancing ability
- Market conditions
Sustainable Growth:
- Don't overextend
- Maintain quality
- Build systems
- Manage risk
- Long-term focus
7 / BRRRR Method Example
A detailed example shows how BRRRR works in practice:
Property purchase
Property Details:
- Purchase price: $100,000
- Condition: Needs work
- Location: Good area
- ARV estimate: $200,000
- Rehab estimate: $30,000
Financing:
- Down payment: $25,000 (25%)
- Hard money loan: $75,000
- Interest: 12% (short-term)
- Points: 2% ($1,500)
Rehab phase
Rehab Costs:
- Kitchen: $8,000
- Bathrooms: $6,000
- Flooring: $4,000
- Paint: $3,000
- Electrical/Plumbing: $4,000
- Other: $3,000
- Contingency: $2,000
- Total: $30,000
Timeline:
- Rehab duration: 2 months
- Holding costs: $2,000 (interest, utilities)
- Total investment: $132,000
Rental phase
Property After Rehab:
- Value: $200,000 (ARV achieved)
- Condition: Excellent
- Ready to rent
Rental:
- Monthly rent: $1,800
- Tenant found: 1 month
- Lease signed: 1 year
- Income: $1,800/month
Refinance phase
Refinance Details:
- ARV: $200,000
- Refinance 75%: $150,000
- New rate: 6.5%
- New payment: $948/month
- Closing costs: $4,000
Capital Recovery:
- Refinance: $150,000
- Pay off hard money: $75,000
- Closing costs: $4,000
- Net: $71,000 recovered
- Plus: $20,000 profit
Results
Final Numbers:
- Initial investment: $25,000 (down payment)
- Rehab: $30,000
- Holding costs: $2,000
- Total invested: $57,000
- Recovered: $71,000
- Profit: $14,000 + property
Property Ownership:
- Own property worth $200,000
- Loan: $150,000
- Equity: $50,000
- Cash flow: $852/month ($1,800 rent - $948 payment)
- Annual cash flow: $10,224
Next Property:
- Use $71,000 for next BRRRR
- Repeat process
- Build portfolio
8 / Common BRRRR Mistakes
Avoiding common mistakes saves time, money, and prevents failed deals:
Mistake #1: Overpaying for property
Problem: Paying too much, leaving no profit margin.
Why It's Wrong:
- Can't recover capital
- No profit
- Deal doesn't work
- Lose money
Solution: Follow 70% rule. Negotiate aggressively. Walk away from bad deals.
Mistake #2: Underestimating rehab costs
Problem: Rehab costs more than budgeted.
Why It's Wrong:
- Over budget
- Can't complete rehab
- Can't refinance
- Deal fails
Solution: Get multiple quotes. Add 15-20% contingency. Budget conservatively.
Mistake #3: Over-improving
Problem: Spending too much on luxury improvements.
Why It's Wrong:
- Doesn't add value
- Wastes money
- Can't recover costs
- Poor ROI
Solution: Focus on value-add improvements. Avoid luxury. Stay within budget.
Mistake #4: Poor property selection
Problem: Buying property in bad area or with major issues.
Why It's Wrong:
- Won't rent well
- Won't appraise well
- Hard to refinance
- Poor investment
Solution: Research area thoroughly. Inspect property. Verify comps. Buy quality.
Mistake #5: Not having financing lined up
Problem: Can't get financing for purchase or refinance.
Why It's Wrong:
- Can't complete deal
- Lose earnest money
- Waste time
- Miss opportunities
Solution: Pre-qualify with lenders. Have backup financing. Understand requirements.
Mistake #6: Rushing the process
Problem: Moving too fast, making mistakes.
Why It's Wrong:
- Poor decisions
- Costly mistakes
- Quality suffers
- Deal fails
Solution: Take time. Do due diligence. Plan carefully. Execute properly.
Mistake #7: Not having reserves
Problem: No money for unexpected costs.
Why It's Wrong:
- Can't handle surprises
- Deal fails
- Financial stress
- Forced to sell
Solution: Maintain reserves. Budget for surprises. Have backup plan.
Pro Tip: The BRRRR method requires discipline and attention to detail. One mistake can derail the entire deal. Take your time, do proper analysis, and execute each step carefully. Quality execution is more important than speed.
9 / BRRRR Method Checklist
Use this checklist to ensure successful BRRRR execution:
Buy Phase
- [ ] Find undervalued property
- [ ] Analyze deal (70% rule)
- [ ] Verify ARV with comps
- [ ] Estimate rehab costs
- [ ] Calculate total investment
- [ ] Verify refinance potential
- [ ] Make offer
- [ ] Complete due diligence
- [ ] Secure financing
- [ ] Close on property
Rehab Phase
- [ ] Create rehab plan
- [ ] Get contractor bids
- [ ] Set budget with contingency
- [ ] Begin rehab work
- [ ] Monitor progress
- [ ] Track expenses
- [ ] Ensure quality
- [ ] Complete all work
- [ ] Final inspection
- [ ] Clean property
Rent Phase
- [ ] Prepare property for rent
- [ ] Take professional photos
- [ ] Create listing
- [ ] Market property
- [ ] Screen tenants
- [ ] Select quality tenant
- [ ] Sign lease agreement
- [ ] Collect deposit and rent
- [ ] Document rental income
- [ ] Verify tenant is paying
Refinance Phase
- [ ] Wait required time (if needed)
- [ ] Gather documentation
- [ ] Apply for refinance
- [ ] Complete appraisal
- [ ] Review loan terms
- [ ] Close on refinance
- [ ] Pay off original loan
- [ ] Calculate capital recovery
- [ ] Verify profit
- [ ] Update records
Repeat Phase
- [ ] Identify next property
- [ ] Use recovered capital
- [ ] Start next BRRRR cycle
- [ ] Maintain deal pipeline
- [ ] Refine processes
- [ ] Build portfolio
- [ ] Track performance
- [ ] Scale operations
Conclusion: Mastering BRRRR for Portfolio Growth
The BRRRR method is a powerful strategy for rapid portfolio growth. By recycling capital through refinancing, you can build a portfolio much faster than traditional buy-and-hold. Success requires finding the right properties, executing rehabs that add value, and refinancing strategically.
Key Takeaways:
- Find undervalued properties - Use 70% rule, buy below market
- Rehab strategically - Focus on value-add, stay on budget
- Rent quickly - Quality tenants, market rate, stable income
- Refinance to recover capital - Pull out equity, recycle capital
- Repeat systematically - Use recovered capital, build pipeline
- Avoid common mistakes - Proper analysis, adequate reserves, quality execution
- Build systems - Efficient processes, scale operations
Remember: BRRRR is a sophisticated strategy that requires capital, knowledge, and execution. Start with one property, learn the process, and scale systematically. With proper execution, BRRRR can accelerate your portfolio growth significantly.
Resources for Property Owners
Ready to master BRRRR? Here are helpful resources: