The BRRRR method — Buy, Rehab, Rent, Refinance, Repeat — is the strategy that turned a handful of small rental properties into a portfolio. I've done it twice: once on a duplex that worked out well, and once on a single-family where I underestimated rehab costs and sat with the loan for two extra months. The method is real, but it's not magic. It's a sequence of decisions, each one with a cost and a risk. Here's how it actually works.
BRRRR is a way to build a rental portfolio without putting all your cash into each property. The idea:
If the numbers work, you end up owning a rental property with little or none of your own money still in it, and you can use that same capital again. If the numbers don't work, you're stuck with a property that doesn't cash flow and a loan you can't refinance out of.
The whole strategy depends on buying below market value. If you pay full price, there's no equity to pull out at refinance, and the method falls apart.
What to look for: distressed properties — deferred maintenance, outdated interiors, motivated sellers (estate sales, divorces, pre-foreclosures, tired landlords). The property should be in a neighborhood where rents support a conventional mortgage after rehab.
The math: purchase price + rehab costs should be no more than 70–75% of the after-repair value (ARV). That leaves room for closing costs, holding costs, and a margin of safety. If a property is worth $200,000 after rehab, you should pay no more than $140,000–$150,000 total (purchase + rehab).
Financing the purchase: most BRRRR deals start with cash or a hard money loan. Conventional mortgages won't finance distressed properties (they need to be habitable). Hard money is expensive (10–15% interest, 2–4 points) but fast — see my hard money guide for when it makes sense.
Rehab is where most BRRRR deals go wrong. The budget is always higher than you think, the timeline is always longer, and the surprises are always more expensive. I've never had a rehab come in under budget.
The scope: focus on what makes the property rentable, not what makes it perfect. New paint, updated flooring, working appliances, clean bathrooms, and a solid roof. Don't over-improve — you're not selling to a homeowner, you're renting to a tenant.
The budget: get three contractor bids, add 20% for surprises, and set aside a holding cost reserve (loan payments, utilities, insurance during rehab). If the rehab is structural (foundation, roof, electrical), get an engineer's assessment before you buy.
The timeline: most rehabs take 2–3x longer than the contractor says. Plan for 60–90 days, not 30. Every extra month costs you the loan payment plus the opportunity cost of not having the capital available for the next deal.
After rehab, the property needs to rent for enough to cover the mortgage, taxes, insurance, maintenance reserve, and vacancy reserve — with money left over. That's cash flow, and it's the reason you're doing this.
The 1% rule: a rough screen — monthly rent should be at least 1% of the total investment (purchase + rehab). A $150,000 property should rent for $1,500/month. This isn't a hard rule, but it's a useful filter. If the numbers don't work at 1%, they probably won't work at all.
Screening tenants: this is where the long-term success or failure of the deal is decided. A bad tenant costs thousands in eviction, damage, and lost rent. Use a consistent screening process: credit check, background check, employment verification, and prior landlord references. Don't skip this step to fill a vacancy faster.
Property management: if you're not going to manage it yourself, budget 8–10% of rent for a property manager. Good managers are worth the fee; bad managers cost you more than they save. Interview at least three before hiring.
This is the step that makes BRRRR work. After the property is rented and stabilized (usually 6–12 months), you refinance into a conventional mortgage. The new loan is based on the appraised value (which should be close to your ARV), and you use the proceeds to pay off the hard money loan and pull out your original capital.
The requirements: conventional lenders want to see 6–12 months of rental history, a stable tenant, and the property in good condition. You'll need 20–25% equity in the property (the appraised value minus the new loan). If you bought at 70% of ARV and rehabbed to ARV, you should have enough equity.
The timing: most lenders have a "seasoning" requirement — you need to own the property for 6–12 months before they'll refinance. Check this before you buy; some lenders won't refinance at all if the property was purchased with hard money.
The costs: refinancing costs 2–5% of the loan amount in closing costs. Factor this into your numbers. If the refinance doesn't pull out enough to cover your original capital plus costs, the deal doesn't work.
Use my mortgage calculator to figure out what the new payment will be, and the rent vs buy calculator to verify the cash flow works at the refinanced payment.
If the refinance pulls out all your original capital (or close to it), you can use that same money on the next property. That's the "repeat" step — and it's where the compounding happens. Each cycle, you're using the same capital to acquire another property, and each property cash flows.
The constraint: conventional lenders have limits on how many financed properties you can own (usually 10). After that, you need portfolio loans or commercial financing, which have different terms.
The risk: if the market turns and property values drop, you can be underwater on the refinance — you owe more than the property is worth. This is why buying below market value matters. The margin of safety protects you when values fluctuate.
BRRRR is a real strategy, but it's not passive income — it's a sequence of active decisions with costs and risks at each step. Buy below market value, rehab to rentable (not perfect), rent to a screened tenant, refinance to pull your capital back out, and repeat. The margin of safety at purchase is what protects you when rehab runs over or the appraisal comes in low. For the numbers, my mortgage calculator and closing cost calculator help you stress-test each deal. Related: the hard money guide for financing the purchase.
I've done BRRRR twice and made the mistakes in this article. This site is one person writing about real estate — not an investor with a big portfolio, just what actually worked.