BRRRR Strategy for Beginners: Complete 2026 Guide to Building Wealth Through Real Estate

What is the BRRRR Strategy?

The BRRRR method is a popular real estate investment strategy that stands for Buy, Rehab, Rent, Refinance, and Repeat. It's like house flipping, but instead of selling the property after renovation, you rent it out with an eye on long-term appreciation and passive income.

• This strategy allows investors to:
• Build a rental portfolio with limited capital
• Recover their initial investment through refinancing
• Generate passive income while building equity
• Scale infinitely by recycling the same capital

The 5 Steps of BRRRR Explained

Step 1: Buy

The first step is finding a property with potential. Look for:

• Distressed properties (foreclosures, pre-foreclosures, bank-owned)
• Fixer-uppers you can buy at a discount
• Properties in good locations that need cosmetic updates

The 70% Rule: Never buy a distressed property for more than 70% of its after-repair value (ARV) minus repair costs.

• Example: If ARV is $250,000 and repairs cost $40,000:
• Maximum purchase price = ($250,000 × 70%) - $40,000 = $135,000

Step 2: Rehab

Once you've acquired the property, renovate it to increase value. Focus on:

• High-ROI improvements: Kitchen updates, bathroom remodels, flooring
• Curb appeal: Landscaping, exterior paint, new front door
• Structural issues: Foundation, roof, HVAC if needed
• Retrofitting: Energy-efficient upgrades that justify higher rents

Pro Tip: The goal is to increase value without overspending. Balance renovation costs against the expected increase in ARV.

Step 3: Rent

After rehab, place a quality tenant:

• Screen thoroughly: Credit check, background check, income verification, references
• Set market rent: Research comparable rentals in the area
• Use a lease: Protect yourself with a comprehensive rental agreement
• Consider property management: If you're scaling, professional management frees your time

Target rent should cover your mortgage payment, taxes, insurance, and generate positive cash flow.

Step 4: Refinance

This is where the magic happens. After stabilizing the property with a tenant:

1. Get an appraisal at the new, higher value (ARV)
2. Cash-out refinance at 75-80% of the new value
3. Recover your capital (or most of it)
4. Lock in long-term financing (30-year fixed DSCR loan)

• Example:
• Purchase + Rehab: $175,000
• New ARV: $250,000
• Refinance at 75% LTV: $187,500
• Cash recovered: $12,500 profit + original investment back

Seasoning Requirement: Most lenders require 6 months of ownership before cash-out refinancing. Some offer delayed financing exceptions for cash purchases.

Step 5: Repeat

• Take your recovered capital and do it again! Each successful BRRRR:
• Adds a cash-flowing rental to your portfolio
• Returns your capital for the next deal
• Builds long-term wealth through appreciation

BRRRR Financing Options

Acquisition Phase

Refinance Phase

[Explore DSCR Loans](/programs/dscr) | [Fix & Flip Financing](/programs/fix-and-flip)

Pros and Cons of BRRRR

Advantages

✅ Wealth Building: Leverage your initial investment to grow a portfolio. Use equity and rental income from one property to buy the next.

✅ Passive Income: Develop steady rental income streams that diversify your investments and reduce reliance on active income.

✅ Continuous Equity: Build equity during rehab as you add value, improving your refinance potential.

✅ Scalable System: Once you've completed your first BRRRR, the process becomes repeatable.

✅ Tax Benefits: Depreciation, mortgage interest deduction, and deferred capital gains.

✅ Long-Term Appreciation: Unlike flipping, you keep properties and benefit from appreciation plus rental income.

Challenges

⚠️ High Starting Costs: Requires significant upfront capital for down payment, renovation, and holding costs.

⚠️ Finding Deals is Hard: Success depends on finding properties with renovation potential. Competition is high.

⚠️ ARV Risk: Overestimating after-repair value can leave capital trapped in the deal.

⚠️ Rehab Cost Overruns: Underestimating repair costs can eliminate your profit margin.

⚠️ Time Commitment: Renovating and managing rentals requires significant effort.

⚠️ Ongoing Repairs: As a landlord, you're responsible for maintenance and repairs.

BRRRR vs House Flipping

Both strategies involve buying distressed properties and renovating them, but the exit strategy differs:

• Choose BRRRR if:
• You want long-term wealth building
• You prefer passive rental income
• You have time and patience to scale
• You want tax benefits from depreciation

• Choose Flipping if:
• You want quick profits
• You don't want landlord responsibilities
• You prefer project-based work
• You need capital for other investments

BRRRR Success Metrics

Target these numbers for a successful BRRRR deal:

Infinite Return: When you recover 100% of your capital through refinancing, your cash-on-cash return becomes infinite because you have no money left in the deal but still receive cash flow.

Common BRRRR Mistakes to Avoid

1. Overestimating ARV Be conservative with your after-repair value estimates. Get comps from a real estate agent and consider getting a pre-rehab appraisal.

2. Underestimating Rehab Costs Always add a 10-20% contingency to your rehab budget. Unexpected issues will arise.

3. Ignoring Holding Costs Factor in mortgage payments, insurance, taxes, and utilities during the rehab period.

4. Rushing the Tenant Placement A bad tenant can destroy your returns. Take time to screen properly.

5. Not Having Reserves Keep 3-6 months of expenses in reserve for vacancies and repairs.

6. Forgetting Seasoning Requirements Most lenders require 6 months before cash-out refinancing. Plan your timeline accordingly.

How to Find BRRRR Properties

On-Market Sources - **MLS listings**: Work with an investor-friendly agent - **Foreclosure auctions**: Bank-owned properties - **Estate sales**: Inherited properties needing updates

Off-Market Sources - **Direct mail**: Send letters to absentee owners - **Wholesalers**: Pay a fee for pre-negotiated deals - **Driving for dollars**: Look for distressed properties - **Tired landlords**: Network with property managers

Frequently Asked Questions

How much money do I need to start BRRRR investing? The amount varies by market, but typically you need 10-20% of the purchase price plus rehab costs. With a successful BRRRR, you can recover most or all of this capital through refinancing.

What's the seasoning requirement for cash-out refinance? Most DSCR lenders require 6 months of seasoning. Some offer delayed financing exceptions if you paid cash for the property.

Can I do BRRRR with no money down? While true "no money down" is rare, you can minimize costs by using hard money loans covering 90% of purchase and 100% of rehab, partnering with private lenders, or using home equity from other properties.

What if my ARV comes in lower than expected? If your appraisal is lower than expected, you may not recover all your capital. This is why conservative estimates and thorough due diligence are critical.

Is BRRRR better than traditional buy-and-hold? BRRRR allows you to recycle capital and scale faster, but requires more active involvement. Traditional buy-and-hold is simpler but ties up capital longer.

Get Started with BRRRR

Ready to start your BRRRR journey? We provide financing for every phase:

• Acquisition: Fix & flip loans with up to 90% LTV and 100% rehab coverage
• Refinance: DSCR loans with up to 80% LTV cash-out, no income verification

[Get Pre-Approved](/get-started) | [BRRRR Deal Calculator](/programs/brrrr) | [Fix & Flip Loans](/programs/fix-and-flip)