The BRRRR Method
Buy, Rehab, Rent, Refinance, Repeat. The strategy aims to recycle the same capital infinitely by forcing appreciation and pulling initial equity out through a cash-out refinance.
The Execution Steps
Buy
You must buy a distressed property below market value. The cardinal rule is the 70% rule: Your purchase price plus rehab costs should not exceed 70% of the After Repair Value (ARV).
Rehab
Force appreciation through renovations. Focus on ROI-heavy improvements: kitchens, bathrooms, floors, and adding bedrooms/square footage if possible.
Rent
Place a tenant in the property. Lenders require the property to be stabilized and generating income before they will approve a refinance based on the new ARV.
Refinance (The Critical Step)
Conduct a cash-out refinance based on the new appraised value (ARV). Commercial lenders typically allow up to 75% LTV on a cash-out refi. If executed perfectly, the 75% loan amount pays off the initial purchase loan and covers your rehab costs, leaving zero of your own money left in the deal.
Repeat
Take the capital pulled from the refinance and deploy it into the next distressed property.
The Math (A Perfect BRRRR)
| Target ARV (After Repair Value) | $200,000 |
| 70% Rule Target (Max All-in) | $140,000 |
| - Rehab Budget | -$40,000 |
| Max Allowable Offer (MAO) | $100,000 |
| New Appraised Value | $200,000 |
| Cash-Out Refinance (75% LTV) | $150,000 |
| - Payoff Initial Costs (100k + 40k) | -$140,000 |
| Capital Left in Deal | -$10,000 (You got paid $10k to own it) |
The Seasoning Period Trap
Lenders have "seasoning requirements." Fannie Mae (conventional loans) requires you to hold the property for 12 months before they will lend on the new appraised value (ARV). Commercial DSCR lenders usually require 3 to 6 months of seasoning.