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Investing

BRRRR Method

Also called BRRRR, buy, rehab, rent, refinance, repeat

In short

The BRRRR method is a rental investing strategy: buy a distressed property, rehab it, rent it, refinance based on the higher value, and repeat with the cash pulled out.

Stands for
Buy, Rehab, Rent, Refinance, Repeat
Typical buy
Distressed, below market
Key number
After repair value (ARV)
Main risk
Refinance falls short

The five steps

  1. Buy below market, often a bank-owned home, auction property or pre-foreclosure, using cash or a hard money loan.
  2. Rehab to raise value and make it rentable.
  3. Rent to a qualified tenant to create income.
  4. Refinance into a long-term loan based on the new appraised value.
  5. Repeat using the cash recovered.

How the refinance works

The cash-out amount is roughly new appraised value × lender's maximum LTV - existing loan payoff. If the rehab added enough value, you can recover most or all of your cash. Lenders set the maximum loan-to-value ratio and may require you to own the property for a seasoning period first.

What can go wrong

A low appraisal, rehab overruns, slow lease-up, or higher rates at refinance time can leave cash trapped in the deal or create negative cash flow. Run the numbers with a conservative ARV and check that the property still cash flows at the new loan payment.

The formula

Cash left in the deal after the refinance
Cash left in = Purchase + Rehab + Costs − Refinance loan
Try it in the Rental Property ROI Calculator →
Example

A BRRRR deal that returns most of the cash

An investor buys a REO house for $120,000 and spends $40,000 on repairs and $8,000 on closing and holding costs: $168,000 all-in. After rehab it rents for $1,850 a month and appraises at $215,000. A 75% LTV cash-out refinance gives a $161,250 loan. The investor recovers $161,250 of the $168,000, leaving $6,750 in the deal, as long as rent covers the new payment and expenses.

BRRRR Method vs. Real Estate Wholesaling

BRRRR Method

The BRRRR method is a rental investing strategy: buy a distressed property, rehab it, rent it, refinance based on the higher value, and repeat with the cash pulled out.

Real Estate Wholesaling

Real estate wholesaling is putting a property under contract at a discount and then assigning that contract, or reselling the property, to another investor for a fee, without renovating it.

The differenceBRRRR investors buy, renovate and keep a property as a rental; wholesalers control a property under contract and assign it to another buyer without renovating or owning it.

Frequently Asked Questions

Related terms

After Repair Value (ARV)InvestingAfter repair value (ARV) is the estimated market value of a property once planned repairs and renovations are complete. Investors use it to decide how much to pay for a fixer-upper.RefinanceMortgages & financingTo refinance is to replace an existing mortgage with a new one, usually to get a lower rate, change the loan term, or take cash out of the home's equity.Hard Money LoanMortgages & financingA hard money loan is a short-term loan from a private lender, secured mainly by the property's value rather than the borrower's income. Investors use it to buy and renovate properties quickly.Cash-on-Cash ReturnInvestingCash-on-cash return is a property's annual pre-tax cash flow divided by the total cash the investor put in. It measures the yield on your own money after financing.Loan-to-Value Ratio (LTV)Mortgages & financingLoan-to-value ratio (LTV) compares the size of a mortgage with the property's value. A lower LTV means more equity and less risk for the lender, which often brings better loan terms.REO / Bank-Owned PropertyForeclosure processAn REO (real estate owned) or bank-owned property is a home a lender took back after it failed to sell at foreclosure auction. The lender then sells it, usually through a real estate agent.The 70% RuleInvestingThe 70% rule is a fix-and-flip guideline: pay no more than 70% of a property's after repair value (ARV) minus the cost of repairs. It leaves room for profit, holding and selling costs.Capitalization Rate (Cap Rate)InvestingCapitalization rate (cap rate) is a rental property's net operating income divided by its value or price. It shows the property's unleveraged annual return and is used to compare income properties.

Learn more in the knowledge base

How to Finance a Foreclosure or Distressed PropertyGuide · 7 min readDistressed properties are harder to finance than move-in-ready homes. Condition, timing and the seller's terms all limit which loans will work. This guide matches financing options to each kind of distressed purchase and explains the trade-offs.How to Buy a Bank-Owned Home: A Step-by-Step GuideGuide · 6 min readBuying a bank-owned home looks like a regular purchase, but the seller is a lender with its own forms, deadlines and approval process. This guide walks through each step, from getting financing in place to closing, and points out where REO deals differ from a typical sale.How to Line Up Funds for a Foreclosure AuctionGuide · 7 min readMost foreclosure auctions require payment in cash or certified funds within a short deadline, with no financing contingency. This guide explains common deposit and payment rules, how to show proof of funds, the sources auction buyers use, how to time money between the sale and full payment, and why you need reserves beyond your bid.
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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.