BRRRR — Buy, Rehab, Rent, Refinance, Repeat — is a strategy for recycling one pot of capital through multiple properties: buy distressed below market, force value through renovation, rent it, then refinance against the new value to pull your cash back out for the next deal. When it works, you own a cash-flowing rental with little of your own money left in it. Every step has to work for the loop to close.
The mechanics, by the numbers
The engine is forced appreciation: all-in cost (purchase + rehab + carry) must land well below the after-repair value (ARV). Because cash-out refinances on rentals typically cap at 70–75% LTV, the working rule is all-in ≤ 75% of ARV — that's what lets the refinance return most or all of your capital. Buy at 60% of ARV minus rehab and you pull everything out; buy at 85% and your cash is trapped, which is just a renovation with extra steps.
Where BRRRR deals die
Three places. The ARV: an optimistic after-repair appraisal assumption is the most common failure — comp the ARV like a skeptical appraiser before buying. The rehab: overruns move your all-in past the refinance ceiling. The refinance itself: lenders want seasoning (often 6–12 months of ownership or a signed lease), a DSCR that clears their bar at the NEW loan size, and credit markets that still look like they did when you started. The post-refinance payment must still cash-flow — pulling maximum cash out of a thin deal manufactures a negative-cash-flow property.
Worked example
Purchase $145,000 (distressed duplex), rehab $45,000, carry and costs $10,000 — all-in $200,000. ARV appraises at $280,000; 72% is within the 75% guideline. Refinance at 70% LTV: $196,000 loan returns nearly all capital. Rented at $2,500/month total, the new $1,325 payment plus realistic expenses leaves ~$280/month of cash flow. Same deal at a $250,000 ARV: the refinance returns $175,000, trapping $25,000 — the deal still works, but the "repeat" slows by one cycle.
When this rule of thumb breaks
BRRRR is leverage stacked on execution risk, and it breaks hardest when rates rise mid-project — the refinance you modeled at 6.5% arrives at 7.75% and the DSCR fails. Markets with thin distressed inventory make the "buy below market" step the fantasy step. Repeated maximum-LTV extraction builds a portfolio with no equity cushion — one regional downturn from trouble. And the strategy consumes time and management attention like a part-time job. Perfectly good investing also exists at "buy a decent property, put 25% down" — BRRRR is a tool, not a religion.