BRRRR Method Calculator

The BRRRR Method: Infinite Returns Through Forced Appreciation

BRRRR (Buy, Rehab, Rent, Refinance, Repeat) is a real estate investment strategy that lets you recycle the same capital to build a portfolio of rental properties—sometimes recovering 100% of your initial investment. Unlike traditional buy-and-hold, BRRRR creates equity through forced appreciation, then extracts that equity to fund the next deal. Done correctly, it's one of the fastest paths to a large rental portfolio.

How the BRRRR Method Works (Step-by-Step)

1. Buy: Purchase a distressed property below market value. You're looking for motivated sellers, foreclosures, estate sales, or properties that need cosmetic or moderate repairs. The goal: buy at 60-70% of the After Repair Value (ARV) minus rehab costs.

Example: ARV is $220,000. Rehab will cost $30,000. Maximum purchase price using the 70% rule: ($220,000 × 0.70) - $30,000 = $124,000. You negotiate to buy for $150,000—slightly above the 70% rule but still profitable.

2. Rehab: Renovate the property to increase its value. Focus on improvements that maximize ARV: kitchens, bathrooms, flooring, paint, curb appeal. Avoid over-improving for the neighborhood. Budget carefully—cost overruns kill BRRRR deals.

Example: You spend $30,000 on rehab (new kitchen $12K, new bathrooms $8K, flooring $6K, paint/misc $4K). The property is now worth $220,000 (verified by appraisal).

3. Rent: Place a tenant and stabilize the property. Banks require 6-12 months of rental history before refinancing. Your tenant covers most or all of the holding costs during this period. Screen tenants rigorously—problem tenants delay refinancing and cost thousands.

Example: You rent the property for $1,800/month. After mortgage (temporary hard money loan), taxes, insurance, and expenses, you're breaking even or slightly negative. This is acceptable because the refinance is coming.

4. Refinance: Once the property has a tenant and an appraisal at the new ARV, refinance with a conventional mortgage. Banks typically lend 70-75% of ARV. This new loan pays off your original purchase loan and (ideally) returns most or all of your capital.

Example: ARV appraised at $220,000. Bank lends 75% = $165,000. Your total investment was $183,000 ($150K purchase + $30K rehab + $3K closing). The refinance returns $165,000, leaving $18,000 of your money still in the deal. You've recovered 90% of your capital.

5. Repeat: Take the recovered capital and start the next BRRRR deal. With $165,000 back in hand, you can buy 2-3 more properties (using the recovered cash as down payments). Scale from 1 property to 5, then 10, then 20+ by recycling the same money.

The Math Behind BRRRR Success

Traditional buy-and-hold: You buy a $200,000 property with $40,000 down (20%). That $40,000 is locked into the property for years. To buy 5 properties, you need $200,000 in cash.

BRRRR method: You buy a distressed $150,000 property, spend $30,000 on rehab, and refinance at $220,000 ARV. You recover $165,000 (75% LTV), leaving only $18,000 of your capital in the deal. To buy 5 properties, you only need $18,000 × 5 = $90,000 in cash—less than half the traditional method.

Even better: In some BRRRR deals, you recover 100%+ of your investment, leaving $0 in the deal. This is called an "infinite return"—you own a cash-flowing asset with none of your own money invested. These deals are rare but achievable with strong negotiation and accurate ARV estimates.

The 70% Rule: Your BRRRR Buying Filter

The 70% rule is the BRRRR investor's quick math for determining maximum purchase price:

Max Purchase Price = (ARV × 0.70) - Rehab Costs

Examples:

• ARV: $200,000 | Rehab: $25,000 | Max offer: ($200K × 0.70) - $25K = $115,000
• ARV: $300,000 | Rehab: $40,000 | Max offer: ($300K × 0.70) - $40K = $170,000
• ARV: $180,000 | Rehab: $20,000 | Max offer: ($180K × 0.70) - $20K = $106,000

Following the 70% rule ensures you capture enough equity to recover most of your capital in the refinance. Going above 70% (like 75-80%) can still work if you're confident in the ARV and rehab budget, but leaves less room for error.

Cash-on-Cash Return in BRRRR Deals

Cash-on-cash return measures annual cash flow divided by cash left in the deal after refinancing. BRRRR deals often produce 20-50%+ cash-on-cash returns because you have little capital invested.

Example calculation:

• Monthly rent: $1,800
• Monthly expenses (new mortgage, taxes, insurance, maintenance, vacancies): $1,200
• Monthly cash flow: $600
• Annual cash flow: $600 × 12 = $7,200
• Cash left in deal after refinance: $18,000
• Cash-on-cash return: $7,200 / $18,000 = 40%

Compare this to traditional buy-and-hold with $40,000 down and $400/month cash flow = 12% cash-on-cash return. BRRRR multiplies your returns by reducing capital invested.

Finding BRRRR Properties: Where to Look

BRRRR success depends on buying below market value. Here's where to find distressed properties:

• MLS listings: Filter for "fixer-upper," "handyman special," "TLC needed," "estate sale." Work with an investor-friendly agent who understands BRRRR.
• Foreclosures/REOs: Banks selling foreclosed properties often price below ARV to move inventory quickly. Competition is high.
• Wholesalers: Real estate wholesalers find distressed properties and assign contracts to investors. You pay a wholesale fee but save time on deal sourcing.
• Direct mail campaigns: Send letters to absentee owners, tired landlords, probate properties, code violations. Response rates are 1-3%, but deals are less competitive.
• Driving for dollars: Drive neighborhoods looking for neglected properties. Research ownership and send offers. Time-intensive but can uncover hidden gems.
• Auctions: Courthouse steps, online auctions (Auction.com, Hubzu). High risk (can't inspect properties), but potential for deep discounts.

Common BRRRR Mistakes That Destroy Returns

• Overestimating ARV: You think the property will appraise for $250K, but it only hits $220K. The refinance loan is smaller, leaving more of your cash trapped. Always get conservative ARV estimates from recent comps.
• Underestimating rehab costs: Budget $25K, actual costs hit $40K. You're $15K deeper into the deal, killing your refinance recovery. Add 20% contingency to all rehab budgets.
• Choosing the wrong lender: Some banks won't refinance properties owned less than 6-12 months (seasoning requirements). Research lender policies before buying.
• Ignoring cash flow: You recover all your cash but the property cash flows $0 or negative. Now you own a break-even property that drains reserves. Always verify positive cash flow post-refinance.
• Over-improving for the neighborhood: Installing luxury finishes in a C-class neighborhood won't increase ARV proportionally. Match rehab quality to neighborhood standards.
• Skipping inspections: You waive inspection to win the deal, then discover foundation issues, mold, or electrical problems that double rehab costs. Always inspect or price risk into your offer.

Financing BRRRR Deals: Where to Get the Money

Traditional mortgages don't work for BRRRR because banks won't lend on properties needing major repairs. Here are BRRRR financing options:

1. Hard Money Loans: Short-term loans (6-18 months) from private lenders at 8-12% interest. They lend based on ARV (70-75%), funding both purchase and rehab. Expensive but fast. Ideal for first BRRRR deal.

2. Private Money: Borrow from friends, family, or other investors at negotiated terms (e.g., 8% interest-only for 12 months). Cheaper than hard money but requires strong relationships.

3. Home Equity Line of Credit (HELOC): If you own a primary residence with equity, tap a HELOC at 7-9% interest. Flexible repayment, low closing costs. Risky if you can't refinance and repay.

4. Cash Partners: Partner with someone who provides capital (70-80%) while you manage the deal (20-30% plus sweat equity). Split profits 50/50 or 60/40. Good for building experience with limited funds.

5. Cash (Your Own): If you have $100K-200K saved, you can self-finance BRRRR deals and avoid interest costs. Best option if you have capital.

BRRRR Timeline: What to Expect

Month 1: Find and purchase distressed property. Close with hard money or cash. Start rehab immediately.

Months 2-3: Complete renovations. Delays are common—plan for 2-4 months. Get property rent-ready.

Month 4: List property for rent. Screen tenants. Place quality tenant with lease.

Months 4-10: Tenant pays rent, property stabilizes. Some lenders require 6 months rental history, others accept day 1.

Month 10-12: Order appraisal. Apply for cash-out refinance. Close on new conventional mortgage (30-45 days).

Total timeline: 10-15 months from purchase to refinance completion. Experienced investors can compress this to 6-9 months.

Scaling with BRRRR: From 1 to 10+ Properties

Deal 1: Invest $50,000 (purchase + rehab). Refinance recovers $45,000. You have $45,000 to deploy again.

Deal 2: Invest $45,000. Refinance recovers $42,000. You have $42,000 + cash flow from property #1.

Deal 3-5: Each refinance returns 80-100% of capital. After 5 deals over 3-4 years, you own 5 cash-flowing properties with $50K-100K in equity each. Total portfolio value: $1M+.

By year 5-7, you can own 10-15 properties using the same initial $50K, recycled through multiple BRRRR cycles. Your limiting factor becomes finding deals, managing rehabs, and lender seasoning requirements—not capital.

Is BRRRR Right for You?

BRRRR is not passive. It requires:

• Ability to accurately estimate ARV and rehab costs
• Project management skills (or hiring a good contractor)
• Access to short-term financing (hard money, cash, HELOC)
• Tolerance for risk (rehab overruns, appraisal shortfalls)
• 6-18 months per deal cycle (not instant)

If you want 100% passive investing, stick to turnkey rentals or REITs. If you're willing to work, learn, and manage projects, BRRRR can build a rental empire faster than any other strategy.