BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It describes a sequence: acquire a property that needs work, improve it, lease it, then refinance based on its new value to pull out some or all of the cash that went in.
The appeal is in the math of the last two steps. But each stage has its own costs and assumptions, and the outcome depends on all of them lining up. This guide follows the cash through a single example.
Stage 1: Buy
The project starts with the purchase price and the costs to close. Many BRRRR purchases are made with cash or short-term financing (such as a hard money loan), because properties that need substantial work can be hard to finance with a conventional mortgage. Short-term financing adds interest and points, which belong in the total cost.
Stage 2: Rehab
The renovation is where value is created — or lost. The budget should include materials, labor, permits, and a contingency for surprises. The length of the rehab matters too, because every month the property sits unrented adds holding costs: taxes, insurance, utilities and any loan interest.
Stage 3: Rent
Once the work is done, the property is leased. The rent sets the property’s income going forward and also affects the refinance: lenders often look at both the appraisal and the property’s ability to cover the new loan payment (see DSCR).
Stage 4: Refinance
A new long-term loan is placed on the property based on its after repair value (ARV) — the appraised value after improvements. Lenders typically limit cash-out refinances to a percentage of that value, known as loan-to-value (LTV). The new loan pays off any short-term financing, and anything left over returns to the investor.
Stage 5: Repeat
If enough cash comes back out, it can fund the next project. That’s the “repeat” — and it only works if the refinance returns a meaningful share of the original cash.
The full example
A BRRRR project from purchase to refinance
Buy and rehab (paid in cash)
| Cost | Amount |
|---|---|
| Purchase price | $140,000 |
| Purchase closing costs | $4,200 |
| Rehab budget | $45,000 |
| Holding costs (5 months × $1,150) | $5,750 |
| Total cost | $194,950 |
Refinance
| Item | Amount |
|---|---|
| After repair value (appraised) | $245,000 |
| New loan at 75% LTV | $183,750 |
| Refinance closing costs | −$5,500 |
| Net cash returned | $178,250 |
| Cash left in the property | $16,700 |
Monthly operations after refinance
| Item | Monthly |
|---|---|
| Rent | $2,150 |
| Vacancy (5%) | −$108 |
| Operating expenses | −$610 |
| Net operating income | $1,432 |
| New loan P&I (7.25%, 30 yr) | −$1,253 |
| Cash flow | $179 |
Hypothetical numbers for illustration.
In this example, $194,950 went in and $178,250 came back out at the refinance, leaving $16,700 in the property. The owner holds about $61,250 in equity (ARV minus the new loan), and the property produces $179 per month in cash flow after the new loan payment.
With $16,700 still invested and $2,148 of annual cash flow, the cash-on-cash return on the remaining cash is 12.9%. Because so little cash remains in the deal, that percentage is high relative to the dollars involved — a common feature of BRRRR math.
The appraisal is the hinge
Everything in the refinance stage depends on the appraised value. If the ARV in the example came in at $225,000 instead of $245,000, the new loan would be $168,750 and the cash left in the property would rise to $31,700.
The appraisal isn’t something the owner controls. It’s based on comparable sales, and it can come in below the number used in planning. That’s why ARV deserves a conservative estimate and why it’s worth running the numbers at more than one value.
Other variables that shift the outcome
- Rehab overruns. Every extra dollar of renovation either stays in the property or has to be recovered through a higher value.
- Timeline. A longer rehab means more holding costs and a later start to rental income.
- Interest rates at the refinance. A higher rate shrinks cash flow and can limit the loan size if the lender applies a DSCR test.
- Seasoning requirements. Some lenders require the owner to hold the property for a period before they’ll lend on the new value rather than the purchase price.
- LTV limits. A 70% limit returns noticeably less cash than a 75% or 80% limit on the same ARV.
What BRRRR math doesn’t change
Refinancing doesn’t create income. After the refinance, the property is a leveraged rental, with all the usual cash flow considerations: vacancy, repairs, CapEx and a loan payment that’s now larger than it would have been with a smaller loan. Pulling more cash out means a bigger loan, a bigger payment and thinner monthly cash flow.
A simple checklist for each stage
- Buy: price, closing costs, and the cost of any short-term financing (points and interest).
- Rehab: a line-item budget, a contingency, and a realistic timeline.
- Rent: market rent from comparable rentals, plus a vacancy allowance.
- Refinance: a conservative ARV, the lender’s LTV limit, refinance closing costs, and the new rate.
- Repeat: the cash left in the property, and the cash flow and coverage of the new loan.
The takeaway
The BRRRR method is a sequence of transactions, and its result is captured in one figure: how much cash is left in the property after the refinance. That number depends on the purchase price, rehab budget, holding time, appraised value and the lender’s LTV limit. Modeling each stage separately — and testing the ARV at a lower value — shows how much room the project has if any one step goes differently than planned.