The Five Steps
Buy a distressed property at a discount, rehab it to market condition, rent it to qualified tenants, refinance into a long-term mortgage based on the new appraised value, and repeat the process with the recovered capital.
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The Math That Makes BRRRR Work
The strategy works when your all-in cost (purchase + rehab + closing) is at or below 75% of the after-repair value (ARV). At 75% LTV, a cash-out refinance returns your full investment, leaving you with a free-and-clear cash-flowing rental.
Where BRRRR Fails
The most common failure points: (1) overpaying at purchase, (2) underestimating rehab costs by 20–40%, (3) appraising below expectations, (4) seasoning requirements delaying refinance, and (5) rate environments that push debt service above sustainable rent levels.