The BRRRR Method Explained with Real Numbers
BRRRR – Buy, Rehab, Rent, Refinance, Repeat – is one of the most popular strategies for building a rental portfolio. The pitch is compelling: buy a distressed property, fix it up, rent it out, refinance to pull your cash back, and use that cash to do it again. Rinse, repeat, retire.
The reality is more nuanced than the pitch. Let's walk through a complete deal with actual numbers so you can see exactly where every dollar goes.
The Deal
You find a single-family home in a B-class neighborhood. It's ugly – outdated kitchen, worn carpet, peeling paint, overgrown yard. But the bones are good: solid foundation, decent roof with 10+ years left, updated electrical.
Here are the numbers:
- Purchase price: $115,000 (cash or hard money)
- After-repair value (ARV): $190,000 (based on 3 comparable sales within half a mile)
- Expected rent: $1,550/month (based on similar renovated rentals nearby)
The property is listed at $130,000. You negotiate to $115,000 because the seller wants a quick close and the house scares off conventional buyers.
Step 1: Buy
You fund the purchase with a hard money loan at 90% loan-to-value, plus 2 origination points.
| Item | Amount |
|---|---|
| Purchase price | $115,000 |
| Down payment (10%) | $11,500 |
| Closing costs | $3,450 |
| Hard money points (2%) | $2,070 |
| Cash needed to close | $17,020 |
Hard money loan amount: $103,500 at 12% annual interest. That's $1,035/month in interest-only payments. The clock is ticking.
Step 2: Rehab
Your scope of work:
| Item | Cost |
|---|---|
| Kitchen (new cabinets, counters, appliances) | $12,000 |
| Bathroom update | $4,500 |
| LVP flooring throughout | $5,500 |
| Interior and exterior paint | $5,000 |
| Landscaping | $2,000 |
| Miscellaneous (fixtures, hardware, cleaning) | $1,500 |
| Contingency (10%) | $3,050 |
| Total rehab | $33,550 |
Timeline estimate: 10 weeks. Realistic timeline: 12–14 weeks. Budget for 14.
Step 3: Rent
Rehab is done. You list the property for rent at $1,550/month. After two weeks of showings, you sign a lease. Your tenant moves in at the start of month 4.
This step matters more than people realize. Lenders want to see a signed lease and at least one or two rental payments before they'll consider a refinance. Some want 3–6 months of rental history. Check your lender's requirements early.
Step 4: Refinance
Six months after purchase, you apply for a conventional cash-out refinance. The lender orders an appraisal.
The appraisal comes back at $185,000. Not quite your $190,000 ARV estimate, but close enough. The lender offers 75% loan-to-value on the appraised value.
$185,000 x 0.75 = $138,750 new loan
That new loan pays off your hard money balance and closing costs, and the rest comes back to you.
Here's the full accounting of what you put in and what you get back:
Total cash invested:
| Item | Amount |
|---|---|
| Down payment | $11,500 |
| Purchase closing costs | $3,450 |
| Hard money points | $2,070 |
| Rehab costs | $33,550 |
| Holding costs (6 months) | |
| – Hard money interest | $6,210 |
| – Property taxes | $1,500 |
| – Insurance | $750 |
| – Utilities | $900 |
| Refinance closing costs | $3,500 |
| Total invested | $63,430 |
(You collected 3 months of rent at $1,550 during months 4–6, which offsets $4,650 of those holding costs. Net cash invested: $58,780.)
Cash returned from refinance: New loan: $138,750 Pay off hard money: –$103,500 Remaining: $35,250 back in your pocket
Cash still in the deal: $58,780 – $35,250 = $23,530
Cash recovery percentage: 60%
Wait, That's Not Infinite Returns
No, it's not. And that's the honest reality of most BRRRR deals. You still have $23,530 of your own money in this property. The deal worked – you own a cash-flowing rental and recovered 60% of your capital. But you can't fully repeat the cycle with recovered funds alone.
For this deal to hit 100% cash recovery, you'd need one of the following:
- A purchase price closer to $95,000–$100,000
- An appraisal at $205,000+
- Rehab costs $10,000 lower
- An 80% LTV refinance instead of 75%
Each of those is possible on the right deal. But stacking all four is rare. Most BRRRR deals recover 60–85% of invested capital. That's still a great outcome – you're building a portfolio with significantly less capital than buying each property outright. It's just not the zero-money-in story you see online.
Monthly Cash Flow After Refinance
Your new mortgage on $138,750 at 7% for 30 years: $923/month (principal and interest).
| Item | Monthly |
|---|---|
| Rent | $1,550 |
| Mortgage (P&I) | –$923 |
| Property taxes | –$250 |
| Insurance | –$125 |
| Vacancy (8%) | –$124 |
| Maintenance (8%) | –$124 |
| CapEx (5%) | –$78 |
| Management (10%) | –$155 |
| Net cash flow | –$229 |
Hmm. After the refinance, this property is cash-flow negative. That bigger loan means a bigger mortgage, and the expenses add up.
This is the tension at the heart of BRRRR: pulling more cash out means a bigger loan, which squeezes (or kills) cash flow. You have to balance cash recovery against monthly performance. A deal that returns 100% of your capital but loses $200/month isn't a win. It's a slow drain.
For this property to cash flow positively after refinance, you'd want a lower refinance amount – maybe $120,000 instead of $138,750. That means leaving more cash in the deal but owning a property that actually makes money each month.
When BRRRR Works and When It Doesn't
BRRRR works well when:
- You buy at a genuine discount (20%+ below ARV)
- Your rehab costs are predictable and controlled
- The rental market is strong enough to support cash flow even with a refinanced mortgage
- You have a lender lined up who will refinance on your timeline
BRRRR struggles when:
- Purchase prices are too close to ARV (not enough spread)
- Appraisals come in low
- Interest rates are high, making post-refinance cash flow tight
- You over-improve the rehab and spend more than the neighborhood supports
- Holding costs pile up because the rehab or tenant placement takes longer than expected
Run Your Own Numbers
Every BRRRR deal is different. The only way to know if yours works is to run the full math: purchase, rehab, holding costs, rental income, refinance terms, and cash flow after the new loan.
Use the [BRRRR calculator](/calculators/brrrr) to see your cash recovery percentage, monthly cash flow, and whether the numbers actually support the strategy.