The BRRRR method — Buy, Rehab, Rent, Refinance, Repeat — is the most efficient wealth-building strategy in rental real estate. But every BRRRR deal lives or dies in the analysis phase. Buy wrong, and you’re trapped in a property with too little equity to refinance out. Buy right, and you pull most or all of your cash back out and do it again. Here’s exactly how to run the numbers before you make an offer.
The 5 Numbers That Determine Every BRRRR Deal
- Purchase Price — what you pay for the distressed property
- Rehab Cost — all-in renovation budget (get contractor bids, add 15% contingency)
- ARV (After-Repair Value) — what the property is worth after renovation, based on comparable sales
- Rental Income — market rent for the stabilized property
- Refinance LTV — typically 70–75% of ARV on a DSCR cash-out refinance
Step-by-Step BRRRR Deal Analysis
| Step | Input / Formula | Example Numbers |
|---|---|---|
| 1. Total Acquisition Cost | Purchase + Rehab + Holding Costs + Closing | $120K + $40K + $8K = $168K |
| 2. ARV | Comparable sales within 1 mile, similar size/bed/bath | $240,000 |
| 3. Max Refinance Amount | ARV × 70–75% LTV | $240K × 75% = $180K |
| 4. Cash Left In Deal | Total Cost − Refinance Amount | $168K − $180K = −$12K (cash out!) |
| 5. Monthly Rent | Market rent for stabilized property | $1,950/month |
| 6. DSCR Check | Monthly rent ÷ PITI payment | $1,950 ÷ $1,210 = 1.61 ✓ |
| 7. Monthly Cash Flow | Rent − PITI − Vacancy (5%) − Maintenance (5%) | $1,950 − $1,210 − $98 − $98 = $544/mo |
In this example: the investor pulls out $12,000 more than they put in, keeps the property, and nets $544/month cash flow. That’s the BRRRR working perfectly.
The 70% Rule — Your Quick Filter
Before running full numbers, use the 70% rule to screen deals fast:
Maximum Purchase Price = (ARV × 70%) − Rehab Cost
Using our example: ($240K × 70%) − $40K = $168K − $40K = $128K max purchase. We bought at $120K — inside the rule. If a seller wants $160K, walk away. The math doesn’t work.
Where Most BRRRR Deals Fail
- Overpaying for ARV — using aspirational comps instead of actual closed sales. Use the most conservative comparable you can find.
- Underestimating rehab — contractors lowball bids to get the job. Add 15–20% to every bid before you analyze the deal.
- Ignoring holding costs — hard money interest, property taxes, insurance, and utilities during rehab add up fast. A 4-month rehab on a $120K hard money loan at 10.5% costs ~$4,200 in interest alone.
- Not confirming rent before closing — call 3 property managers in the target zip code and ask what the property will rent for after rehab. Do not use Zillow rent estimates.
- DSCR below 1.25 — lenders want to see $1.25 in rent for every $1.00 of payment. If your stabilized rent doesn’t hit that, the refi loan may not be available or rates will be worse.
How BRRRR Financing Works — Phase by Phase
Phase 1 — Acquisition + Rehab: Hard money loan covers purchase and can include a rehab draw schedule. Typical terms: 10–12%, 12-month term, 70–75% of ARV (not purchase price). Closes in 5–10 business days.
Phase 2 — Rent Up: Get the property leased. Most DSCR lenders want a signed lease showing market rent before they’ll fund the refinance.
Phase 3 — DSCR Cash-Out Refi: Once rented, refinance into a 30-year DSCR loan at 70–75% of the new appraised value. No tax returns, no W-2s — the rent covers the payment, and that’s the underwrite. Pull your equity out and deploy it on the next deal.
FAQ — BRRRR Deal Analysis
How long do I have to wait before I can do the DSCR refinance?
Most DSCR lenders require a 3–6 month seasoning period after the rehab is complete and the property is rented. Some allow day-1 cash-out refinance if the appraisal supports it and you’ve owned the property for at least 6 months total. Ask us about our seasoning requirements — they vary by program.
Can I use the BRRRR method if I don’t have a lot of cash to start?
Yes — hard money lenders typically fund 70–75% of ARV, which usually covers the purchase price of a distressed deal if you’re buying right. You’ll still need to cover rehab costs (often from a rehab draw line included in the hard money loan) and closing costs. Some investors start with one BRRRR, pull cash out, and use that as seed capital for the next.
What if the appraisal comes in lower than my ARV estimate?
This is the biggest BRRRR risk. If the appraisal misses your ARV by 10–15%, your refinance loan will be smaller — meaning more cash stays trapped in the deal. Mitigate this by being conservative with comps, getting a pre-rehab appraisal with an “as improved” value, and not stretching on purchase price.
Can I do BRRRR in an LLC?
Yes — both the hard money acquisition loan and the DSCR refinance can be done in an LLC. Many investors structure every BRRRR deal in a separate LLC for liability protection. We lend directly to LLCs with no seasoning requirement on the entity.
Have a BRRRR deal you want to run numbers on? Call 877-895-3634 or apply online — we’ll pre-qualify the deal within 24 hours.