The BRRRR strategy — Buy, Rehab, Rent, Refinance, Repeat — is one of the most effective ways to build a rental portfolio without constantly needing fresh capital. The key is using the right financing at each stage. Here’s how the loans actually work.
How the BRRRR Strategy Works
- Buy: Acquire a distressed property below market value
- Rehab: Renovate to force appreciation and bring it to rental condition
- Rent: Lease the property at market rate
- Refinance: Pull out equity via a cash-out refinance based on the new appraised value
- Repeat: Use the refinanced cash as the down payment on the next deal
Done correctly, you can recover most or all of your original down payment and closing costs — leaving you with a cash-flowing rental and capital to deploy again.
Stage 1: The Purchase and Rehab Loan
The first loan you need is a fix-and-flip or hard money loan that covers both the purchase price and renovation costs. These loans are based on the property’s After-Repair Value (ARV) rather than the current as-is value.
- Finance up to 90% of purchase + 100% of rehab costs
- Loan based on 70–75% of ARV
- Interest-only payments during renovation
- Close in 5–10 business days
Example: A distressed property worth $120,000 as-is, with $40,000 in renovations needed and an ARV of $240,000. A lender might loan up to $168,000 (70% of $240K ARV), covering both purchase and rehab with minimal money out of pocket.
Stage 2: The Refinance After Stabilization
Once the property is renovated and rented, you refinance into a permanent loan. For BRRRR investors, this almost always means a DSCR cash-out refinance.
- No W-2s or tax returns — qualifies on rental income
- Up to 75% LTV cash-out refinance
- 30-year terms available (lower monthly payment than the short-term loan)
- Uses new appraised (post-rehab) value, not purchase price
Example continued: The same property is now worth $240,000 after renovation and is rented at $1,800/month. A DSCR cash-out at 75% LTV = $180,000 loan. Original purchase + rehab was ~$160,000. You get $180K out, recover more than your original investment, and keep the property generating $1,800/month.
The Seasoning Question
Most DSCR lenders require a 6-month seasoning period before they’ll do a cash-out refinance. This means you need to own the property for at least 6 months after purchase (some lenders require 12 months). Plan your timeline accordingly — the short-term loan needs to carry you through that period.
Some lenders will use the new appraised value (not original purchase price) after just 6 months if the rehab is complete and documented. This is called “delayed financing” or “purchase price waiver” — ask your loan officer about this upfront.
BRRRR Financing Checklist
- Fix-and-flip lender who understands ARV-based lending (not just as-is value)
- DSCR lender for the refinance (no income docs, long-term hold)
- Property must appraise at or above ARV estimate after rehab
- Rent must support the new DSCR payment (DSCR ≥ 1.0)
- Reserves: 3–6 months PITIA post-refinance
Ready to start your BRRRR cycle? See our fix-and-flip loan program for Stage 1, and our DSCR loan program for Stage 2. Or get a free quote and tell us where you are in the process.