The BRRRR Strategy Explained: Buy, Rehab, Rent, Refinance, Repeat
The BRRRR method lets real estate investors recycle capital across multiple properties. Learn how to execute BRRRR using private capital and DSCR loans, and what numbers you need to make it work.
# The BRRRR Strategy Explained: Buy, Rehab, Rent, Refinance, Repeat
BRRRR is a real estate investment strategy that allows you to build a rental portfolio while recycling most or all of your invested capital. Here's how it works — and what you need to make it work.
What Is BRRRR?
B — Buy a distressed property below market value R — Rehab it to increase its value R — Rent it to a tenant R — Refinance with a DSCR loan based on the new, higher value R — Repeat the process with the returned capital
A Simple BRRRR Example
| Step | Action | Numbers |
|---|---|---|
| Buy | Purchase distressed property | $70,000 |
| Rehab | Complete renovation | $30,000 |
| Total invested | $100,000 | |
| ARV after rehab | $160,000 | |
| DSCR Refinance (75% LTV) | $120,000 | |
| **Capital returned** | $120K out - $100K in | **$20,000 returned** |
| Net capital in deal | $80,000 equity |
In this example, you pulled out all your original capital plus $20,000. You now own a rental property with $80,000 in equity — with zero of your own money remaining in the deal.
The Critical Number: ARV vs. All-In Cost
BRRRR only works if your ARV significantly exceeds your all-in cost (purchase + rehab + carrying costs + closing costs):
> BRRRR Rule of Thumb: Buy + Rehab ≤ 70–75% of ARV
If you're at or above 80% of ARV, the refinance won't return enough capital to make the strategy worthwhile.
Step 1: The Fix and Flip Loan
The Buy and Rehab phases are financed with a private/hard money fix and flip loan: - Up to 90% of purchase price - Up to 100% of rehab costs - 12–24 month terms - No income verification
This short-term loan bridges you through the purchase and renovation.
Step 2: The DSCR Refinance
Once the property is rented (typically with 3–6 months of lease history), you refinance with a 30-year DSCR loan: - Based on the new, higher ARV - Qualifies on rental income, not personal income - Proceeds pay off the fix and flip loan - Excess proceeds return your capital
What Can Go Wrong
- ARV is lower than expected — Not enough loan to pay off the hard money
- Tenant doesn't qualify — Many DSCR lenders want 3–12 months of seasoning
- Rates rise — Higher DSCR rates reduce the amount you can borrow
- Rehab costs overrun — Less spread on the back end
BRRRR Markets That Work Best
The best BRRRR markets combine: - Low acquisition prices - High value-add potential (distressed inventory) - Strong rental demand - Achievable ARV relative to all-in cost
Ohio (Cleveland, Columbus, Cincinnati), Michigan (Detroit, Grand Rapids), and the Southeast (Atlanta, Memphis, Birmingham) are consistent performers.