BRRRR — Buy, Rehab, Rent, Refinance, Repeat — is one of the most popular strategies for building a rental portfolio with limited capital. The idea is simple: buy a distressed property below market value, renovate it, rent it out, refinance to pull your cash back out, and repeat with the same capital.
The execution, however, depends entirely on getting the math right. Here's how to calculate each phase of a BRRRR deal so you know before you offer whether the numbers actually work.
The entire BRRRR strategy hinges on buying below market value. The 70% rule gives you a ceiling.
ARV = After-Repair Value (what the property will appraise for after renovation). The 30% margin covers your profit, holding costs, closing costs, and a buffer for surprises.
Example: You find a 3-bedroom in a neighborhood where comparable renovated homes sell for $200,000 (that's your ARV). Estimated rehab is $35,000. MAO = ($200,000 x 0.70) - $35,000 = $105,000.
If the seller wants $130,000, the deal doesn't work at 70%. Some investors use 75% for low-risk rehabs, but loosening the rule is how deals go sideways. The 70% rule exists because rehab projects always cost more than estimated.
The rehab is where most new BRRRR investors lose money. The fix is a detailed scope of work before you close.
A 4-month rehab at $1,050/month in interest plus $400/month in taxes, insurance, and utilities adds $5,800 to your total project cost. Budget for 6 months even if your contractor says 3.
Before you can refinance, you need the property leased and stabilized. Most lenders require:
Use the stabilized rent to calculate your operating income. If comparable 3-bedrooms in this neighborhood rent for $1,600/month, that's your baseline. Be conservative — use the lowest comparable, not the highest.
This is the critical calculation. You're taking out a new loan based on the improved property value and using the proceeds to pay off the original purchase financing and (ideally) get your cash back.
Most lenders offer 70-75% LTV on cash-out refinances for investment properties. Some go to 80% with strong credit and reserves.
Example: The property appraises at $200,000 (your ARV target). At 75% LTV, the new loan is $150,000. Closing costs are $4,500 (roughly 3%). You paid off the hard money already with the new loan. Cash back = $150,000 - $4,500 = $145,500 available after refi.
Add up everything you spent:
Cash recovered from refi: $145,500. Cash left in deal: $13,200.
You own a $200,000 property with $50,000 in equity, a performing lease, and only $13,200 of your original capital still tied up. Your cash-on-cash return on that $13,200 is the monthly cash flow divided by $13,200 — likely very strong.
The infinite return scenario: If the refi returns ALL your invested capital (cash left = $0 or less), you have infinite cash-on-cash return. The property cash flows, you own equity, and your capital is fully recycled to the next deal. That's the BRRRR ideal.
Walk away if:
The BRRRR strategy's power is capital recycling. If you can't get most of your cash back on the refinance, you're just buying a rental property the expensive way.
MAO calculator, rehab budget, holding costs, cash-out refi scenarios, and cash-left-in-deal verdict. $29, one-time purchase.
See the BRRRR CalculatorWhat does BRRRR stand for in real estate?
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. The strategy involves purchasing a distressed property below market value, rehabbing it to increase its worth, renting it to generate income, refinancing to pull out equity based on the new appraised value, and using the returned capital to fund the next deal. Done correctly, each cycle leaves you with a cash-flowing rental and most or all of your initial capital recycled back out.
What is the 70% rule for buying a BRRRR property?
The 70% rule says your Maximum Allowable Offer (MAO) should not exceed 70% of the After-Repair Value (ARV) minus estimated rehab costs. If a property will be worth $200,000 after repairs and needs $40,000 in work, your max offer is ($200,000 × 0.70) − $40,000 = $100,000. The 30% buffer covers closing costs, holding costs, and your profit margin on the refinance.
How much cash should I have left in after a BRRRR refinance?
The BRRRR goal is zero dollars left in the deal — all acquisition and rehab capital returned through the cash-out refinance. In practice, most successful BRRRR investors target under 10% of total project cost remaining after the refi. If you still have 30–50% of your cash tied up post-refi, the deal underperformed and your capital recycling rate is limited for the next acquisition.
What cash-out refinance LTV is standard for a BRRRR rental property?
Most lenders will cash-out refinance an investment property at 70–75% of appraised value. Some portfolio and DSCR lenders go to 80% for strong borrowers. The appraisal is done after rehabilitation is complete. Reaching your target cash recovery depends on your ARV estimate being accurate — an optimistic ARV is the most common reason BRRRR deals leave more cash in than expected.
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