BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. The idea is to buy a property below its potential value, improve it, rent it out, then refinance based on the higher value to pull out some or all of the cash you invested. That cash can then fund the next deal.
The strategy can help investors grow a portfolio faster than saving for each down payment, but it also carries real risk. Everything depends on the first step. If you overpay or underestimate the rehab, the refinance may not return your capital, and the deal can stall. This article covers the Buy step: setting criteria, finding properties, running the numbers and choosing financing.
This is general information, not financial advice. Talk with a lender, a CPA and other qualified professionals before committing to a strategy.
Set your buying criteria
Clear criteria keep you from chasing deals that do not fit. Before you look at a single listing, decide:
- Market and neighborhoods. Areas where you understand rents, demand and resale values, and where you or a manager can operate.
- Property type. Single-family homes, small multifamily or another type you can rehab and manage. Our single-family investing guide covers one common starting point.
- Rehab scope. Cosmetic updates only, or heavier work such as roofs, systems and layout changes.
- Target numbers. Minimum monthly cash flow, target cash-on-cash return and the maximum price you will pay.
Write these down and share them with agents, wholesalers and lenders so they know what to send you.
Find distressed properties
BRRRR works best with properties that need work, because that is where the value gap comes from. Common sources include:
- Listings that have been on the market a long time or are marketed as needing repairs
- Estate sales, probate properties and inherited homes
- Foreclosures, auctions and bank-owned properties
- Off-market leads through direct mail, networking and wholesalers
- Tired landlords looking to sell problem rentals
Distressed properties often have hidden issues. Inspect thoroughly, bring a contractor to estimate repairs and verify permits, title and any liens before you commit.
Analyze the deal
Three numbers matter most at the Buy stage: the after repair value, the rehab budget and the purchase price.
After repair value (ARV) is the estimated value once the work is finished. It is usually based on recent sales of similar, updated homes nearby. Be conservative, and remember that the lender’s appraiser will make the final call at refinance. See appraised value.
Rehab budget covers materials, labor, permits and a contingency for surprises. Many investors add a contingency of 10 to 20 percent, more for older properties.
The 70% rule is a quick screening heuristic, not a law of investing. It suggests paying no more than 70 percent of ARV minus rehab costs. For example, with a hypothetical ARV of $250,000 and a $40,000 rehab, the rule points to a maximum offer of about $135,000 ($250,000 times 0.70, minus $40,000). Use it to filter deals quickly, then run a full analysis with holding costs, closing costs, financing and expected rent.
Also estimate the rent and expenses once the property is stabilized. Tools like cap rate and NOI help you judge whether the property will cash flow after the refinance.
Choose your financing
How you pay for the purchase and rehab affects your risk and your refinance options. Common approaches include:
- Cash. Simplest and fastest to close, but ties up the most capital.
- Hard money loans. Short-term loans based largely on the property and the deal, often covering part of the purchase and rehab. Rates and fees are typically higher.
- Private lenders. Individuals who lend on negotiated terms. Put every agreement in writing.
- Conventional or portfolio loans. Lower rates, but they may be harder to use for properties in poor condition.
- Lines of credit. Some investors use credit lines secured by other property, which adds risk to that property.
Plan your exit before you buy. Know roughly how much a lender will refinance and how long you may need to wait, which the next article on refinancing covers.
What comes next
After the purchase, the work shifts to rehab and renting. A steady rental history supports the refinance, so plan your rental listings and tenant screening early. TenantLoop can help with listings, applications and rent collection once the property is ready, with screening coming soon. Explore the full BRRRR hub for each step.
What owners ask at this step.
What is after repair value?
The estimated value of the property once the work is finished, usually based on recent sales of similar updated homes nearby. Estimate it conservatively.
Is the 70% rule a hard limit?
No. It is a quick screen: pay no more than 70 percent of after repair value minus rehab costs. Run a full analysis with real numbers before you make an offer.
How big a contingency should a rehab budget have?
Many investors add 10 to 20 percent for surprises, and more for older properties.