BRRRR stands for buy, rehab, rent, refinance, repeat. You buy a property that needs work, fix it, rent it out, then refinance at the higher repaired value and pull your cash back out for the next one. When it works, the same pile of cash buys house after house. When the appraisal or the rehab budget misses, the cash stays stuck in the first one.
Here is one house worked through every step. All prices, costs and the loan rate are examples; your market will differ.
Buy: start from the after-repair value
Everything hangs on the after-repair value, or ARV: what the house will appraise for once fixed. Get it from recent sales of similar, updated homes nearby, not from the listing.
A common rule of thumb sets the most to pay at 70% of ARV minus the rehab budget:
ARV $250,000 × 70% = $175,000. Minus $42,000 of rehab = $133,000, the most to offer.
The 30% gap is not profit. It pays for closing costs, the months the house sits empty during work, and the difference between the appraised value and what a refinance will lend.
Rehab: count every dollar you put in
| Cost | Amount |
|---|---|
| Purchase price | $133,000 |
| Closing costs on the purchase | $4,000 |
| Rehab: kitchen, flooring, paint, roof repair | $42,000 |
| Holding: 6 months of tax, insurance, utilities | $7,000 |
| All-in cost | $186,000 |
Holding costs are the line people forget. If you borrow the purchase money on a short-term rehab loan, its interest belongs here too. Keep a contingency on top: budgeting for a 20% overrun would mean another $8,400 here.
Rent: the numbers the lender and you will both read
The repaired house rents for $2,250 a month. Allow 5% vacancy and 8% management, with $225 a month of property tax, $125 of insurance and $150 of repairs.
The NOI calculator gives $17,598 of net operating income a year. Now two cap rates:
- On the ARV: $17,598 ÷ $250,000 = 7.0%, what a buyer of the finished house would earn.
- On your all-in cost: $17,598 ÷ $186,000 = 9.5%, what the rehab earned you.
The gap between them is the value you created. The one percent rule tells the same story: $2,250 is 1.21% of your all-in cost but only 0.9% of the ARV.
Refinance: the step that makes or breaks it
Under the conventional loan guidelines most lenders follow, a cash-out refinance on a one-unit investment property can lend up to 75% of the appraised value; for two to four units, 70%. Timing matters as much as value:
- Seasoning. You generally need six months on title before a cash-out refinance can use the new appraised value, and a first mortgage being paid off must be at least 12 months old. Many lenders require 6 to 12 months in all, and some add rules of their own.
- Buying with cash helps, a little. A cash buyer can refinance sooner, but the new loan is capped at what was paid for the house plus closing costs, not the rehab. Here that is about $137,000, leaving roughly $49,000 in the house until a later refinance.
After six months, at an example rate of 7% for 30 years:
| Appraisal $250,000 | Appraisal $225,000 | |
|---|---|---|
| New loan at 75% | $187,500 | $168,750 |
| Less refinance costs ($4,500) | $183,000 | $164,250 |
| Cash left in the deal | $3,000 | $21,750 |
| Loan payments a year | $14,969 | $13,472 |
| Cash flow a year (NOI − payments) | $2,629 | $4,126 |
| NOI ÷ payments | 1.18 | 1.31 |
A low appraisal traps $18,750 more of your cash but leaves a safer, smaller loan. Many lenders on rentals want NOI of at least 1.2 to 1.25 times the loan payments; the full refinance falls just short of that.
The cash-on-cash trap
Cash-on-cash return is yearly cash flow divided by the cash you have in the deal. With $3,000 left in, $2,629 of cash flow is an 87.6% return. With $21,750 left in, it is 19.0%.
The first number sounds better and is the thinner deal: $219 a month, with little room for a vacancy or a furnace. When almost no cash stays in, the percentage says more about the denominator than the property. Judge the monthly dollars, the debt coverage and your reserves alongside it.
Repeat: what runs out first
- Cash. Each round leaves some behind: closing costs, overruns, a short appraisal. The rehab overrun alone would have left $11,400 in this deal instead of $3,000.
- Reserves. Lenders want six months of payments in the bank for an investment property, plus a percentage of the balances on your other financed rentals.
- Loan count. Conventional guidelines cap a borrower at ten financed properties, counting a mortgaged home.
- Time. Every round is a purchase, a rehab, a lease-up and a refinance, each with its own delays, and your own hours go into all four.
Stress-test the refinance before you buy
You buy months before you refinance, and the rate can move in between. Rerun the same $187,500 loan at higher example rates:
| Refinance rate | Payments a year | Cash flow a year | NOI ÷ payments |
|---|---|---|---|
| 7% | $14,969 | $2,629 | 1.18 |
| 7.5% | $15,732 | $1,866 | 1.12 |
| 8% | $16,510 | $1,088 | 1.07 |
At 8% the house still pays for itself, barely: $91 a month. A lender that underwrites on the property’s income could size the loan down at that coverage, which pushes more of your cash back into the deal. If a one-point move would sink the numbers, the deal was never as good as the 7% column made it look.
When to walk away
Skip the deal if it only works at the top of the comparable sales, if the rehab has no contingency, or if the cash flow turns negative at a rate one point above today’s quote. A lower price is the only fix that helps every column at once: each $10,000 off the purchase is $10,000 less left in the deal, whatever the appraisal says.
A deal that survives the worse case is one you can repeat. The cap rate guide covers how to read the yield you are left with, and the NOI guide how to check a seller’s expense figures before you trust your own rent estimate.
Questions people ask
How long do you have to wait to refinance in the BRRRR method?
Many lenders require 6 to 12 months. Under the conventional guidelines most lenders follow, you need six months on title before a cash-out refinance can use the new appraised value, and a first mortgage being paid off must be at least 12 months old.
What is the 70% rule in BRRRR?
A rule of thumb for the most to pay: 70% of the after-repair value, minus the rehab budget. It leaves room for closing and holding costs and for a refinance that lends about 75% of value. It is a screen, not a guarantee.
What happens if the appraisal comes in low?
The new loan shrinks, so more of your cash stays in the property. In the example here, an appraisal of $225,000 instead of $250,000 leaves $21,750 in the deal instead of $3,000, though the smaller loan improves monthly cash flow.
Written by LoomLease editors. Published September 30, 2026. Plain English, not legal, tax or financial advice: your lease, your state’s law and a professional who knows your situation decide what applies.