Key takeaways
- BRRRR uses short-term money to buy and renovate, then a long-term loan to refinance at the higher, after-repair value.
- Your goal is to leave as little cash in the deal as possible while keeping positive cash flow.
- Confirm the refinance lender's LTV and seasoning rules before you buy.
- Rehab overruns and low appraisals are the two most common reasons capital gets trapped.
The BRRRR financing stack
- Buy + Rehab: a hard money or private loan funds most of the purchase and the renovation (see fix & flip loans). Some investors pay cash or use a HELOC instead.
- Rent: place a qualified tenant at market rent. A signed lease strengthens the refinance.
- Refinance: a DSCR or conventional cash-out loan, typically at 70–80% of the new appraised value, pays off the short-term loan and returns some or all of your cash.
- Repeat: recycle the returned capital into the next property.
A full walkthrough with numbers
| Phase 1: Buy & rehab | |
|---|---|
| Purchase price | $160,000 |
| Rehab | $45,000 |
| Buying closing costs | $4,500 |
| Short-term loan interest, points, holding | $12,000 |
| All-in cost | $221,500 |
| Short-term loan (90% purchase + 100% rehab) | $189,000 |
| Your cash in | $32,500 |
| Phase 2: Refinance | |
|---|---|
| Appraised value (ARV) | $285,000 |
| DSCR refi at 75% LTV | $213,750 |
| Refi points & closing (3%) | $6,413 |
| Pay off short-term loan | $189,000 |
| Cash back to you | $18,337 |
| Cash left in the deal | ≈ $14,163 |
| Phase 3: Hold | |
|---|---|
| Rent | $2,450/mo |
| Vacancy, management, repairs, capex reserve (20%) | −$490 |
| Taxes + insurance | −$380 |
| New P&I (7.25%, 30-yr) | −$1,458 |
| Monthly cash flow | ≈ $122 |
| Cash-on-cash on $14,163 left in | ≈ 10.3% |
| Equity after refi | $71,250 |
| DSCR on refi | ≈ 1.33x |
This is a good but not perfect BRRRR: you recover more than half your cash, own $71,000 of equity and cash flow modestly. Buying $15,000 cheaper, or adding more value in the rehab, would push it toward a "full" BRRRR where you leave nothing in.
Model your BRRRR
See cash left in the deal, cash flow, cash-on-cash and DSCR, live.
Open the BRRRR calculator →Seasoning: the rule that surprises people
"Seasoning" is how long you must own a property before a lender will use the new appraised value instead of your purchase price plus documented rehab. Policies vary: some DSCR lenders allow a refinance at appraised value soon after purchase, while others cap cash-out loans at your cost basis for the first several months. Conventional lenders often have stricter waiting periods. Ask your refinance lender for its seasoning policy before you close on the purchase.
One lender or two?
- Two lenders (a hard money lender, then a separate DSCR lender) let you shop each step for the best terms, but add two sets of fees and appraisal risk.
- One lender offering both short-term and rental loans ("fix-to-rent") can streamline the refinance, sometimes with reduced fees or a pre-agreed exit, but may cost more on one leg.
Five mistakes that trap your capital
- Rehab overruns. Spending 20% over budget can turn a full BRRRR into a deal that strands your cash. Keep a 10–20% contingency.
- Low appraisal. Use conservative, recent sold comps. Provide the appraiser with your scope of work and before-and-after photos.
- Assuming 80% LTV. Many lenders cap cash-out refinances at 70–75%.
- Ignoring rate risk. If rates rise during the rehab, the same rent supports a smaller loan. Re-check DSCR before the refi.
- Slow lease-up. No tenant means no rent to qualify, while your short-term loan keeps accruing interest.