BRRRR Method Explained: Buy, Rehab, Rent, Refinance, Repeat

The BRRRR method is one of the most powerful strategies for building long-term wealth through real estate. It lets you recycle your capital and scale your portfolio faster.

The 5 Steps of BRRRR

1. BUY (Below Market Value)

The key to BRRRR is buying at a significant discount. Target:

• Distressed properties needing cosmetic work
• Motivated sellers (divorce, probate, foreclosure)
• Off-market deals

Rule of Thumb: Buy at 70-75% of After Repair Value (ARV) minus repairs.

2. REHAB (Force Appreciation)

Add value through strategic renovations:

• Focus on kitchens, bathrooms, flooring
• Don't over-improve for the neighborhood
• Hire reliable contractors or learn to DIY

3. RENT (Generate Cash Flow)

Place a quality tenant and stabilize the property:

• Screen tenants thoroughly
• Set rent at market rate
• Most lenders require 6+ months of rental history before refinancing

4. REFINANCE (Pull Out Your Capital)

Once the property is stabilized at its new value:

• Get a cash-out refinance at 75-80% LTV
• Ideally, pull out 100% of your original investment
• Now you have your cash back PLUS a cash-flowing rental

5. REPEAT (Scale Your Portfolio)

Take that capital and do it again. Each cycle adds another property to your portfolio.

Example BRRRR Deal in Sacramento

Step	Numbers
Purchase Price	$250,000
Rehab Costs	$40,000
All-In Cost	$290,000
After Repair Value (ARV)	$400,000
Cash-Out Refi (75% LTV)	$300,000
Cash Returned	$300,000 - $290,000 = $10,000 profit
Monthly Rent	$2,200
Monthly Mortgage (new loan)	$1,800
Cash Flow	$400/month

You now own a property with $100k in equity, $400/month cash flow, and got your original capital back.

Common BRRRR Mistakes

1. Overestimating ARV - Be conservative
2. Underestimating rehab costs - Add 20% buffer
3. Rushing the refinance - Wait for seasoning period
4. Negative cash flow - Run the numbers on the refinanced payment

Is BRRRR Right for You?

BRRRR requires more work than buying turnkey rentals, but the returns are significantly higher. It's best for investors who:

• Have renovation experience or a reliable team
• Can handle the complexity of multiple transactions
• Want to scale aggressively