Guide · Updated September 2026
Leer en españolThe BRRRR method, one deal start to finish
Buy, rehab, rent, refinance, repeat. One deal with every cost shown, how much cash comes back at the refinance and what happens if the appraisal comes in low.
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BRRRR stands for buy, rehab, rent, refinance, repeat. You buy a house below its potential value, fix it up, rent it out, then refinance based on the new appraised value to pull most of your cash back out, and use that cash on the next property. The goal is to own a rental with very little of your own money left in it.
Here is one deal, step by step. The numbers are the same ones pre-filled in our BRRRR calculator, so you can change any of them and follow along.
1. Buy and rehab
You buy a house for $130,000 with $3,000 in closing costs. It needs $35,000 of work. A short-term (hard money) lender covers 90% of the price and 100% of the rehab: a $152,000 loan at 11% interest-only, plus 2 points. You hold the house for six months while you fix it and find a tenant, at $600 a month for taxes, insurance and utilities.
| Cost | Amount |
|---|---|
| Purchase price | $130,000 |
| Closing costs | $3,000 |
| Rehab | $35,000 |
| Loan points (2% of $152,000) | $3,040 |
| Interest (6 months at 11%) | $8,360 |
| Holding costs (6 months) | $3,600 |
| Total project cost | $183,000 |
| Less: short-term loan | −$152,000 |
| Your cash in | $31,000 |
2. Check the 70% rule
The after-repair value (ARV) is $240,000. The 70% rule says pay no more than $240,000 × 0.70 − $35,000 = $133,000. At $130,000 the deal passes, with a small margin.
3. Rent it
The house rents for $2,000 a month. Operating expenses (taxes, insurance, maintenance, reserves and vacancy) are about $600 a month.
4. Refinance
A new lender appraises the house at $240,000 and lends 75% of that value: $180,000 at 7.25% for 30 years.
| Refinance | Amount |
|---|---|
| New loan (75% of $240,000) | $180,000 |
| Pay off the short-term loan | −$152,000 |
| Refinance closing costs | −$4,500 |
| Cash back to you | $23,500 |
| Cash left in the deal ($31,000 − $23,500) | $7,500 |
You got back about 76% of your cash and kept $60,000 of equity.
5. Does it still cash flow?
The new mortgage is $1,228 a month. Rent of $2,000 minus $600 of expenses minus $1,228 leaves about $172 a month, or $2,065 a year. On the $7,500 still in the deal, that is a 27.5% cash-on-cash return.
The debt service coverage ratio (DSCR) is $1,400 ÷ $1,228 = 1.14. Many lenders look for 1.20 to 1.25 on rental loans, so this deal is close to the line. A lender could offer a smaller loan, which would leave more of your cash in the deal.
What can go wrong
- The appraisal comes in low. At a $220,000 appraisal the new loan is $165,000, you get back only $8,500, and $22,500 stays in the deal instead of $7,500. The whole strategy rests on the ARV.
- Rates move. At 8% instead of 7.25%, the payment rises to $1,321 and cash flow falls to about $79 a month.
- The refinance takes longer. For a conventional cash-out refinance, Fannie Mae generally requires at least one borrower to have been on title for six months before the new loan closes. Every extra month on an 11% hard money loan costs about $1,400 here, plus holding costs.
- Rehab runs over. Budget a contingency. A 10% to 20% overrun is common on older houses.
The takeaway
BRRRR works when you buy well below value and the appraisal backs you up. Before you buy, run the deal at a lower ARV, a higher refinance rate and a longer timeline. If it still works, you have a margin of safety.
Want the full version? BRRRR Deal Analyzer
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Questions
What does BRRRR stand for?
Buy, rehab, rent, refinance, repeat. You buy below value, add value with repairs, rent the property, refinance to pull cash out and use it on the next deal.
How long do you have to wait to refinance a BRRRR?
For a conventional cash-out refinance, Fannie Mae generally requires six months on title before the new loan closes. Some other lenders, including many DSCR lenders, have their own rules, so ask before you buy.
What LTV do lenders allow on a cash-out refinance of a rental?
It varies by lender and loan type. 70% to 75% of the appraised value is a common range for investment properties. Check with your lender.
Is BRRRR still possible with higher interest rates?
It is harder. Higher rates raise the new payment and lower the DSCR, which can shrink the loan. Deals need a bigger discount at purchase to work.
Sources
Educational content, not financial, tax, legal or investment advice. Examples use made-up numbers. Check rates, taxes and loan terms with your own sources.