# The BRRRR Method Explained: Steps, Math & Risks BRRRR (buy, rehab, rent, refinance, repeat) lets investors recycle the same cash across deals. Here is how the math works, with a full example and where it breaks. **Author:** Nathaniel Pitchon-Getzels (Licensed Real Estate Partner & Investment Strategist) — https://www.scouthavens.com/about **Published:** 2026-10-05 · **Updated:** 2026-10-07 **Category:** Financial Modeling & Returns **Canonical URL:** https://www.scouthavens.com/blog/brrrr-method-guide-real-estate --- ## What Is the BRRRR Method? BRRRR stands for buy, rehab, rent, refinance, repeat. You buy a distressed property below market value, renovate it, rent it, then refinance based on its new higher value and pull your cash back out to buy the next one. Done well, it lets one pool of capital build a portfolio. ## The Five Steps - **Buy:** purchase a property that needs work, usually with cash or short-term financing. - **Rehab:** renovate to raise the after-repair value (ARV). - **Rent:** place a tenant. Most lenders want the property rented and stabilized before refinancing. - **Refinance:** obtain a new loan if you qualify, pay off existing financing and transaction costs, and retain any remaining proceeds. Confirm the lender's loan-to-value limit, appraisal basis, seasoning rules, and cash-out restrictions before buying. - **Repeat:** use the cash from the refinance as the next deal's down payment. ## BRRRR Worked Example: Cash Purchase With Refinance Costs This is a hypothetical calculation, not a completed transaction or a lender quote. Assume an all-cash purchase, cash-funded rehab, no existing loan, and no additional holding costs. The 75% LTV and 7% interest rate are illustrative inputs; actual eligibility, costs, and terms vary. - **Purchase price:** $190,000 - **Rehab:** $40,000 - **Acquisition closing costs:** $10,000 - **Cash invested before refinance:** $190,000 + $40,000 + $10,000 = **$240,000** - **After-repair value (ARV):** $320,000 - **Gross refinance loan at 75% LTV:** $320,000 × 0.75 = **$240,000** - **Existing loan payoff:** $0 - **Refinance costs deducted from proceeds:** $5,000 - **Net cash returned:** $240,000 − $0 − $5,000 = **$235,000** - **Cash left in the deal:** $240,000 − $235,000 = **$5,000** - **Rent:** $2,800 a month; operating expenses at 40% = $1,120, so NOI is $1,680 a month - **New loan payment ($240,000, 7.00%, 30 years):** about $1,597 a month - **Monthly cash flow:** $1,680 − $1,597 = **about $83** The refinance returns most of the original cash, but $5,000 remains invested. Using the rounded $1,597 payment, annual cash flow is $996 and cash-on-cash return on that remaining $5,000 is 19.92%. That percentage reflects a small remaining cash denominator; it does not remove the $240,000 mortgage or the thin $83 monthly margin. The assumed 40% expense allowance must cover vacancy, taxes, insurance, management, maintenance, and reserves; replace it with itemized estimates for a real property. ## What Changes If You Used an Acquisition Loan? Suppose the same $190,000 purchase used a $150,000 loan and $40,000 of your cash. Assume the loan payoff is still $150,000, with no extra interest or fees due. Cash invested before refinancing is then $40,000 + $40,000 rehab + $10,000 acquisition costs = $90,000. The $240,000 refinance pays off $150,000 and deducts $5,000 in costs, leaving $85,000 returned to you and $5,000 still invested. Borrowed purchase funds are not your cash contribution. - **Net refinance proceeds:** new loan amount − existing loan payoff − refinance costs deducted at closing. - **Remaining cash invested:** cash contributed before refinance − net proceeds, floored at zero for the calculator's cash-left display. Negative proceeds mean you must bring additional cash to closing. - **Payoff statement:** use the actual payoff amount, including accrued interest and any applicable fees, rather than assuming it equals the original principal. Fannie Mae's [cash-out refinance guidance](https://selling-guide.fanniemae.com/sel/b2-1.3-03/cash-out-refinance-transactions) addresses mortgage payoff, transaction costs, and eligibility restrictions for loans within its program. It is one program's guidance, not a universal rule for every BRRRR lender. Confirm the requirements for your proposed loan. ## Stress-Test the Cash You Can Recover In the cash-purchase example, a $300,000 appraisal at the same assumed 75% LTV produces a $225,000 loan. After $5,000 of refinance costs, you receive $220,000, leaving $20,000 invested. Recalculate the payment for the smaller loan separately. Also model higher operating costs, longer vacancy, and additional holding costs before deciding whether the deal works. If net proceeds cover all of your contributed cash, cash-on-cash return on zero remaining cash is undefined. Report the cash recovered, remaining debt, and monthly cash flow instead of calling the return infinite. ## The 70% Rule The 70% rule is a rough screening heuristic: 70% of ARV minus rehab costs. Here that is $320,000 × 0.70 − $40,000 = $184,000, below the example's $190,000 purchase price. This shortcut does not calculate lender eligibility, net refinance proceeds, holding costs, or rental cash flow. Model those separately; meeting the rule does not guarantee capital recovery or profit. ## Where BRRRR Breaks - **Appraisal comes in low.** A lower ARV means a smaller refinance and cash stuck in the deal. - **Rehab runs over budget or takes longer**, raising holding costs and delaying the refinance. - **Rates rise.** A higher loan rate shrinks cash flow and may fail the lender's [DSCR requirement](/blog/dscr-loan-guide-how-to-calculate-dscr). - **Seasoning rules.** Many lenders require a waiting period after purchase before they will refinance on the new value. ## Model Your Own Deal Reproduce the cash-purchase example in [Haven's free BRRRR calculator](/tools/brrrr-calculator): purchase price and cash invested at purchase $190,000 each; acquisition closing costs $10,000; rehab $40,000; ARV $320,000; LTV 75%; loan payoff $0; refinance costs $5,000; monthly rent $2,800; annual operating expenses $13,440; and rounded monthly mortgage payment $1,597. For the financed example, change cash invested at purchase to $40,000 and loan payoff to $150,000. Use the calculator’s Pre-Refinance Holding & Financing Costs field for cash-paid interest, utilities, taxes, insurance, and financing fees before refinance. The examples above set this input to zero. If those costs total $6,000, original cash invested rises to $246,000 and cash left in the base deal rises to $11,000. At the rounded $996 annual cash flow, cash-on-cash return falls to about 9.05%. Do not include loan principal already counted in payoff or costs already entered elsewhere. For sourcing ideas, see [how to find off-market properties](/blog/how-to-find-off-market-properties-usa). ## Frequently Asked Questions **Q: What does BRRRR stand for?** A: Buy, Rehab, Rent, Refinance, Repeat. You buy a distressed property, renovate it, rent it, refinance at the higher value to recover your capital, then use that cash on the next deal. **Q: What is the 70% rule in BRRRR?** A: A screening guideline: pay no more than 70% of the after-repair value minus rehab costs. It is a rough filter, and local conditions and financing costs can change the right number. **Q: How do I calculate cash returned at refinance?** A: Subtract the existing loan payoff and refinance costs deducted at closing from the new loan amount. A $240,000 loan with a $150,000 payoff and $5,000 in costs returns $85,000. Compare this with your own cash contributions, not the total purchase price funded partly by borrowing. **Q: Does recovering all my cash mean an infinite return?** A: No. A cash-on-cash percentage with zero remaining cash in its denominator is undefined. Track monthly cash flow, outstanding debt, reserves, and ongoing risks even if the refinance recovers your original cash. **Q: Is BRRRR still worth it with higher interest rates?** A: It can be, but higher rates shrink the cash flow after a refinance. Run the numbers at today's rate and make sure the property still covers its debt payment with room to spare. --- *Source: Haven by ScoutHavens (https://www.scouthavens.com). Data methodology: https://www.scouthavens.com/methodology.*