The BRRRR strategy has become one of the most popular methods for building a real estate portfolio with limited initial capital. This comprehensive guide will walk you through each step and show you how to execute this powerful investment strategy successfully.

What is BRRRR?

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It's a real estate investment strategy that allows investors to recycle their capital by forcing appreciation through renovations and refinancing to pull out equity.

Step 1: Buy

The foundation of a successful BRRRR deal is buying right. You're looking for properties significantly below market value that need cosmetic or moderate rehabilitation.

What to Look For:

  • Distressed properties: Foreclosures, estate sales, or properties with deferred maintenance
  • Motivated sellers: Divorce, job relocation, or financial distress
  • Good bones: Solid structure, good location, dated finishes
  • Value-add potential: Room for improvement that increases value

The 70% Rule

A common guideline: Pay no more than 70% of the After Repair Value (ARV) minus repair costs.

Maximum Purchase Price = (ARV x 0.70) - Repair Costs

Example: If ARV is $200,000 and repairs cost $30,000:
Maximum Purchase Price = ($200,000 x 0.70) - $30,000 = $110,000

Step 2: Rehab

The rehab phase is where you force appreciation. Strategic renovations should maximize value while staying within budget.

High-ROI Improvements:

  • Kitchen updates: New countertops, cabinets, appliances (100-150% ROI)
  • Bathroom remodels: Updated fixtures, tile, vanities (100-120% ROI)
  • Flooring: Replace carpet with LVP or hardwood (80-100% ROI)
  • Paint: Fresh neutral colors throughout (200%+ ROI)
  • Curb appeal: Landscaping, exterior paint, front door (100%+ ROI)

Rehab Tips:

  • Get multiple contractor bids
  • Create a detailed scope of work
  • Add 10-15% contingency to your budget
  • Visit the property regularly during renovation
  • Focus on improvements that increase rent potential

Step 3: Rent

A strong tenant at market rent is essential for the refinance step. Lenders want to see income-producing properties.

Rental Preparation:

  • Research comparable rents in the area
  • Price competitively to minimize vacancy
  • Professional photos and listings
  • Thorough tenant screening process
  • Clear lease terms and expectations

Tenant Screening Essentials:

  • Credit check (minimum 600-650 score)
  • Income verification (3x rent minimum)
  • Background check
  • Previous landlord references
  • Employment verification

Step 4: Refinance

This is where the magic happens. After seasoning (typically 6-12 months), you refinance based on the new, higher appraised value.

Refinance Requirements:

  • Seasoning period: Most lenders require 6-12 months of ownership
  • LTV limits: Typically 70-80% of appraised value
  • DSCR requirements: Usually 1.2-1.25 minimum
  • Credit score: 660+ for most investment property loans

Cash-Out Refinance Example:

Purchase price: $110,000
Rehab costs: $30,000
Total invested: $140,000
After Repair Value: $200,000
75% LTV refinance: $150,000
Cash recovered: $150,000 - loan payoff = $40,000+ back in your pocket

Step 5: Repeat

Take the cash you pulled out and do it again. This is how investors scale their portfolios without needing new capital for each property.

Scaling Tips:

  • Build relationships with reliable contractors
  • Develop systems for finding deals
  • Create a network of private lenders for acquisitions
  • Consider property management as you scale
  • Track your numbers meticulously

BRRRR Deal Analysis

Before committing to any BRRRR deal, run the numbers carefully:

Key Questions:

  • What is the realistic ARV?
  • Are repair costs accurate?
  • What rent can I achieve?
  • Will cash flow remain positive after refinance?
  • How much capital will I recover?

Common BRRRR Mistakes to Avoid

  • Overestimating ARV: Be conservative in your projections
  • Underestimating rehab costs: Always add contingency
  • Skipping due diligence: Get inspections before buying
  • Over-improving: Match renovations to the neighborhood
  • Ignoring cash flow: The deal must work post-refinance

Is BRRRR Right for You?

BRRRR works best for investors who:

  • Have time to manage renovations
  • Can access capital for initial purchases
  • Want to build a portfolio quickly
  • Are comfortable with moderate risk
  • Have or can develop contractor relationships

Use Investra's AI-powered analysis tools to evaluate potential BRRRR deals in seconds. Our platform calculates ARV estimates, rehab costs, and projected returns to help you find the perfect property for your next BRRRR project.