What BRRRR means
BRRRR stands for buy, rehab, rent, refinance, repeat. The strategy uses refinancing to return some of the cash invested in a rental property. The amount returned depends on costs, the appraisal, lender requirements, and the refinance loan.
Buy the property
Budget the purchase price, closing costs, loan fees, and cash needed for renovation and holding costs. Compare the expected finished condition with relevant sales before setting an after-repair value (ARV).
The 70% rule is a screening shortcut: 70% of estimated ARV less estimated renovation costs. It does not guarantee a profitable project or a refinance that returns all your cash. Model the full costs and loan terms separately.
Renovate
Write a repair scope and obtain cost estimates. Budget for delays and unpriced work. Renovations may support rent or appraised value, but neither outcome is guaranteed.
Rent the property
Use comparable rental listings and property condition to set a rent assumption. Asking rents are evidence of advertised prices, not proof of achieved rent. Model vacancy, operating expenses, reserves, and the future loan payment.
Check your intended lender's lease and documentation requirements before committing to the project.
Refinance
The new loan first pays off existing purchase and renovation debt. Refinance fees reduce the amount returned to you.
Net refinance proceeds = new loan amount - debt payoff - refinance closing costs.
Cash left invested = cash required before refinance - net refinance proceeds.
Ownership periods, existing-loan seasoning, occupancy, appraisal, and loan-to-value limits depend on the loan program. Fannie Mae's cash-out refinance requirements distinguish these requirements and include exceptions. Confirm the applicable terms with your lender before purchase.
Illustrative refinance example
Assume an all-cash project with $150,000 for purchase, $45,000 for renovation, and $10,000 for purchase and holding costs. No acquisition debt remains to be paid off.
| Item | Amount |
|---|---|
| Cash required before refinance | $205,000 |
| Assumed appraised value | $280,000 |
| New refinance loan at an assumed 75% LTV | $210,000 |
| Existing debt payoff | $0 |
| Assumed refinance closing costs | -$6,000 |
| Net refinance proceeds | $204,000 |
| Cash left invested | $1,000 |
These are example assumptions, not lender terms. A lower appraisal or higher costs would leave more cash invested. Acquisition loans would also need to be repaid from refinance proceeds.
Review rental returns after refinance
Calculate rental cash flow using the new loan payment. Divide annual cash flow by cash left invested only when that amount is positive. When no cash remains invested, cash-on-cash return is not applicable; describe cash recovered and projected cash flow separately.
Repeat only after reviewing the completed project
Compare actual costs, rent, loan terms, and cash returned with your estimates. Cash recovered from one project may not be enough to fund the next.