By Sagi GliksmanReal Estate Investing2 min read
The BRRRR Method: How Buy, Rehab, Rent, Refinance, Repeat Works
The BRRRR method step by step: buy below value, rehab, rent, refinance on the new value and repeat. How each step is financed, with a worked example.
Key takeaways
- BRRRR is buy, rehab, rent, refinance, repeat: grow a rental portfolio by recycling the same cash.
- A fix and flip loan funds the purchase and rehab: up to 90% of purchase and up to 100% of rehab*.
- A DSCR cash-out refinance on the new value replaces it: up to 70% LTV*, qualified on rent, not income.
- Seasoning varies: some programs refinance with no wait once the rehab is done, others want 3 to 6 months.
What the BRRRR method is
BRRRR stands for buy, rehab, rent, refinance, repeat. You buy a property below its potential value, renovate it, rent it out, then refinance it on the higher value.
The refinance returns much of the cash you put in. That cash buys the next property.
The five steps
1. Buy
Find a property that is worth more after a renovation than the purchase price plus the rehab. That gap is what the refinance pulls back out.
2. Rehab
A fix and flip loan funds up to 90% of the purchase and up to 100% of the rehab, capped at 75% of the after-repair value.
The rehab money is paid in draws as the work is completed and inspected.
3. Rent
Lease the finished property. The refinance qualifies on that rent, so a signed lease at market rent makes the next step simple.
4. Refinance
A 30-year DSCR cash-out refinance goes up to 70% of the new appraised value. It pays off the fix and flip loan and returns the difference, less closing costs.
No tax returns: it qualifies on the property's rent.
5. Repeat
Use the cash that came back for the next purchase. Each round adds a rented property to the portfolio.
A worked example
- Purchase $200,000 + rehab $60,000 = $260,000
- Fix and flip loan: $240,000, so $20,000 of your cash goes in
- After-repair value: $360,000
- DSCR cash-out refinance at 70%: $252,000
- Pay off the flip loan and about 3% in costs: $247,560
- Cash back to you: about $4,440, leaving $15,560 in a rented property worth $360,000
- * Subject to underwriting
Seasoning: when you can refinance
Seasoning is how long you must own the property before a lender refinances it on the new value.
It varies by lender. Some programs refinance with no seasoning once the rehab is done. Others want 3 to 6 months of ownership. Plan it before you buy.
Where BRRRR goes wrong
- The appraisal comes in below the after-repair value you planned on
- The rehab runs over budget or over schedule, adding months of interest
- The rent doesn't cover the new payment, so the refinance is smaller
- The refinance lender's seasoning rule doesn't match your timeline
Both loans priced on your deal, the same day. No hard credit pull.
See BRRRR loan termsFrequently asked questions
What does BRRRR stand for?
Buy, rehab, rent, refinance, repeat.
Do you need a lot of cash for BRRRR?
Less than a cash purchase. A fix and flip loan funds up to 90% of the purchase and up to 100% of the rehab, so the down payment and closing costs are the main cash needed.
How long does a BRRRR take?
The rehab sets the pace, often a few months. Add the time to lease the property and any seasoning the refinance lender requires.
Is BRRRR the same as a cash-out refinance?
The refinance is one step of it. BRRRR is the whole cycle: buy, renovate, rent, refinance and repeat.