The BRRRR Method, Step by Step
BRRRR lets you recycle the same cash into one rental after another, but only if the numbers work at every stage. This guide walks through each step and the checks to run before you commit money.
1. Buy below finished value
The whole method depends on buying a property for much less than it will be worth once it is fixed. Look for homes that ordinary buyers and their lenders avoid: outdated kitchens and baths, failed systems, estate sales, tired landlords and listings that have sat on the market.
Before you make an offer, estimate the after-repair value from recent sales of renovated homes nearby, and estimate the rehab budget with a contractor walk-through if you can. Many investors cap their offer so that price plus rehab plus closing costs stays at or below 75% of the after-repair value. Plug your numbers into the BRRRR calculator before you sign anything.
Most BRRRR purchases are made with cash, a hard money loan or a private lender, because conventional lenders will not finance a home that is not livable. Include hard money points and interest in your project cost.
2. Rehab for the appraisal and the tenant
Spend money where it raises the appraised value or the rent, and where it cuts future repairs. Kitchens, bathrooms, flooring, paint and curb appeal usually matter most to appraisers. Roofs, plumbing, electrical and HVAC matter most to tenants and to your repair budget for the next decade.
Avoid high-end finishes that the neighborhood will not pay for. Keep a contingency of 10% to 20% for surprises, and track the actual spend, because every dollar over budget is a dollar more left in the deal after the refinance.
3. Rent it at market rent
A signed lease at market rent supports both the appraisal and the refinance. Many lenders want to see a lease in place, and DSCR lenders size the loan partly on the rent. Screen tenants carefully. A bad tenant in the first year can wipe out the margin you built in the rehab.
Check the cash flow before you refinance. With rent, occupancy and expenses in hand, the cash-on-cash return calculator and the BRRRR calculator show what the property will earn on the new loan.
4. Refinance to pull your cash back out
The refinance replaces your short-term money with a long-term mortgage based on the new value. Lenders typically offer cash-out refinances on investment properties up to 70% to 75% of appraised value. If your all-in cost was $159,500 and the house appraises at $210,000, a 75% loan of $157,500 returns almost all of your cash. After $5,000 of refinance costs, about $7,000 stays in the deal.
Three lender rules decide whether this step works:
- Seasoning: how long you must own the property before the lender uses the new appraised value instead of your purchase price.
- Maximum cash-out loan-to-value for investment properties.
- Minimum debt service coverage. If the rent cannot carry the payment, the lender will shrink the loan. Test it in the DSCR calculator.
Talk to the refinance lender before you buy, not after the rehab.
5. Repeat, carefully
With most of your cash back, you can start the next project. Each refinance adds a mortgage, so keep reserves for vacancies and repairs across the whole portfolio, not just the newest house. Lenders also limit how many financed properties one borrower can hold under some loan programs, so plan your financing a few deals ahead.
Stress-test before you start
Run a pessimistic version of every deal: an appraisal 5% to 10% below your estimate, a rehab 20% over budget, two extra months of holding costs, and a refinance rate a point higher than today. If the deal still leaves a reasonable amount of cash in and still cash flows, it is worth doing. If it only works when everything goes right, keep looking.
Calculators for this guide
Results are estimates for education only, not financial, tax or legal advice. Check numbers with your lender and advisors before you buy. Last reviewed 2026-10-12.