How it works
The BRRRR strategy buys below value, adds value with rehab, rents it, then refinances at the higher after-repair value (ARV) — pulling out equity to recycle into the next deal. The engine tracks the three money flows. Your initial cash: down payment on the purchase plus the full rehab. The refinance: a new loan at 75% of ARV, which pays off the first mortgage and leaves a cash-out. The difference — cash-out minus initial cash — is the money left in the deal: positive means the refi returned your capital (true BRRRR), negative means cash is still deployed. Finally, rent minus expenses gives monthly cash flow, annualised and divided by the cash left in, producing the yield on your remaining exposure. The whole machine runs on the ARV being real: overestimating it turns a 'free' deal into a cash trap, because the refi math collapses when the appraisal comes in low.
Formula
Cash out = 75% x ARV - first loan | Cash left = initial cash - cash out | Yield = annual cash flow / cash left
Tips
- The ARV is the fulcrum — underwrite it from actual recent sales, not optimism.
- Cash-out under 75% LTV is typical; above 80% lenders add costs that kill the strategy.
- A true BRRRR leaves zero to negative cash in the deal — the engine's headline check.
- Keep a 3-month reserve for vacancy even in the best market — the yield math stops during it.
Frequently asked questions
- What is the BRRRR strategy?
- Buy a property below its potential value, rehabilitate it, rent it, then refinance at the new higher value — pulling out most of your original capital to recycle into the next deal. The acronym is Buy, Rehab, Rent, Refinance, Repeat, and the goal is compounding a portfolio with the same dollars.
- How much cash-out can I take?
- Conventional refinances typically allow 75% of appraised value, which is the engine's assumption. The cash-out equals that 75% of ARV minus what you owe on the first loan — the strategy works when the gap exceeds your initial cash.
- What are the risks of BRRRR?
- The appraisal — if it comes in below ARV, the cash-out shrinks and cash stays trapped. Rehab overruns, refinance rates above underwriting, and vacancies all break the numbers. The strategy amplifies returns and risks simultaneously; the engine's cash-left line is the honest scoreboard.
- How long does a BRRRR cycle take?
- Typical timelines run 6-18 months per property: acquisition, rehab, leasing, then the seasoning period lenders require before refinancing (usually 6+ months). During that time your capital is locked, which is why a portfolio approach staggers deals.