How the BRRRR method works
BRRRR stands for buy, rehab, rent, refinance, repeat. You buy a property below its potential value, renovate it, rent it out, then refinance based on the higher after-repair value (ARV) to pull some or all of your cash back out for the next deal.
Cash left in the deal = total project cost − (refinance loan − refinance closing costs)
Key inputs
Total project cost includes the purchase price, rehab budget, purchase closing costs and holding costs while the property is empty. The refinance loan is the ARV multiplied by the lender's loan-to-value limit, often around 70% to 80% for investment properties. Many lenders also require a seasoning period before they will use the new appraised value.
Reading the results
If cash left in the deal is zero or negative, you recovered all of your capital and cash-on-cash return is shown as not applicable. The deal still needs positive monthly cash flow after the new, larger mortgage. A refinance that returns all your cash but leaves negative cash flow is a risk, not a win.
Where BRRRR deals go wrong
Rehab overruns, a lower appraisal than expected, rising rates between purchase and refinance, and longer vacancies all shrink the cash you can pull out. Test a lower ARV and a higher rate before committing. For a full operating analysis of the finished rental, use the rental property calculator.