The Pros & Cons of the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) Strategy

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In BRRRR real estate investing, the property is treated like a flip, using short-term financing such as private money, hard money, a home equity loan, or cash to acquire and rehab. Then, after the property has been finished, it is rented out to a tenant. The owner then obtains a refinance on the property to pay off the short-term loan and turn the property into a stable,
long-term, cash flow positive property.

Of course, as with all investments, the math has to work for the strategy to work. When a person goes to refinance such a property, a bank will typically only refinance up to 75% of the new value. Therefore, for you to get enough to refinance the entire short-term loan and to possibly get back your rehab money, the property needs to be worth significantly more than what you paid for it.

For example, let’s say you bought a property for $100,000. The property needs a $25,000 rehab to be rent ready, for a total cost of $125,000. You could use a short-term loan to buy the property (like hard money) and your own cash to rehab the place. Then, you’d refinance the property with a new loan from a lender. If the new lender’s appraisal came in at $160,000, they might give you 75% of that amount in a new loan, which is $120,000. This would pay back your entire short-term loan, get you most of your rehab budget back, and give you a stable, long-term rental property with $40,000 of equity at the start.

Related: Case Study: My BRRRR Deal That Went Sideways (& What I Learned From It)

Of course, this example only works if the ARV comes out at the $160,000 level. It wouldn’t be as nice if the ARV were to come in at $100,000, and the bank would only give you a loan for $75,000—not even enough to pay back the short-term loan. This is what I mean when I say the math has to work for the strategy to work. Let’s summarize some of the pros and cons of this strategy.


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Potential No Money Down

BRRRR investing is one of my favorite strategies for investing without needing a lot of cash. If the numbers work out right, you could get into a deal for very little money out-of-pocket, or perhaps even none! Of course, the better the deal you can find, the less money you’ll ultimately need to provide.

High ROI

Because of the low amount of out-of-pocket cash you’ll need for this strategy to work, your ROI should be astronomical. In other words, if you end up having only $10,000 in the deal, but you are cash flowing $2,500 per year, that’s a 25% cash-on-cash return, and that doesn’t account for all the equity you built during the rehab stage.


BRRRR real estate investing allows you to build some serious equity right off the bat. Rather than owning a rental property that is worth what you paid for it, wouldn’t owning one that you have $40,000 of equity in be better?

Renting a Rehabbed Property

After the full rehab has been done, and the property is rented, you own and lease a property in Class A condition. This can help you attract the best tenants and reduce your maintenance budget on the property, making your landlording more hassle free.


The Short-Term Loan

The short-term loan you get at the beginning can be expensive, especially if you are using a hard money loan. Also, the short term on these loans can make the carrying costs expensive, possibly resulting in negative cash flow during the time you are paying on the loan. For this reason, many people use a home equity loan or cash to fund the first phase of the project, then refinance to get their cash back so they can rinse and repeat.

The Possibility It Doesn’t Appraise

Of course, if after the rehab, the home doesn’t appraise high enough, you could end up with a problem. This is why doing the correct math going into the deal is imperative.


The refinancing bank will likely require you to wait six months or maybe even 12 months after the original purchase before they will refinance the property. This period of time is known as “seasoning,” and most conventional and portfolio lenders require it. If your end-lender requires you to wait 12 months, but your short-term loan is only good for nine months, you’ve got a problem.

Related: 3 Critical Keys to a Successful Refinance (for the BRRRR Strategy!)

Therefore, when I use this hybrid real estate investing strategy, I try to make sure my short-term loan is for no less than 18 months. This gives me the time I need to refinance, and if something goes wrong after month 12 and the refinance won’t work, I still have six months to sell the property or hunt for a new refinance.

Dealing with a Rehab

Finally, when you use this strategy, you have to deal with the complications of a large rehab project. And trust me, rehabbing a property is not easy. Dealing with contractors, unknown problems, mold, asbestos, theft, and the rest of the headaches that come with a rehab are not fun.

In summary, BRRRR real estate investing can be a powerful way to build wealth through real estate and one of my all-time-favorite strategies. Being able to capitalize on the forced appreciation the way a house flipper would while acquiring a great rental property that will provide years of cash flow is truly getting the best of both worlds. However, the strategy is not a simple undertaking. It requires exquisite math, planning, and the ability to find a great deal. But for those willing to take on the challenge, BRRRR real estate investing can supercharge your business and set you on a path to greatness.

What would you add to this list?

Let me know with a comment!

About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on Like… seriously… a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of “The Book on Investing in Real Estate with No (and Low) Money Down“, and “The Book on Rental Property Investing” which you should probably read if you want to do more deals.


  1. james moore

    Nice to see you write about both sides of this coin. I like how you can take that C class home and make it into an A class one. As you say, you raise the ARV from rehabbing it and you get equity through forced appreciation,. And the end result is quite nice, in that you will attract better tenents and receive higher rents.

    On the flidesde..and anything that offers a good return has some risks. But you say that knowing the numbers and only finding deals where the math works out, will help eliminate hopefully most of that risk, save that the appraisal doesn’t came back as you had caclutated and hoped for…,and then you have a serious problem as you mentioned, However, I do really like that lenders are settting the rule here to only refinance up tp 75% LTV. Which gives everyone good security. I love that part.

    So, Brandon how do you go about in the beginning coming up with a nice ARV, one that the apprasiser will agree with? What are some numbers, stats, or other things one can look at and do to go about this process wisely, so you can avoid getting under appraised? I have a VA loan and refinancing my home to buy investment property was eazy peezy. The one thing I did was provide a list of improvments I made to my home and gave it to the appraiser and he agreed and I was able to borrow more cash. But I am sure they are other important things one can to do as well. I would love to to hear about them,

    Thanks, as always, for you articles and your straight forward approach as a speaker and writer.

  2. Cindy Larsen


    Several years ago, I read your book, watched your vidieos, and read your articles about BRRRR. I was excited, and bought a property to BRRRR. There was one more CON that I subsequently learned about.
    Depreciation. I know you know all about depreciation but for the benefit of those who don’t, I’ll explain why depreciation is a CON.

    Depreciation is also a PRO of course, since it greatly reduces your taxes, and puts tax free cash flow income in your pocket. Short term. Long term is another thing entirely. The problem is that the plan for any property you buy, even one that you plan to hold indefinitely, should include an exit strategy. And depreciation can, unless you are very careful, come back to bite you.

    Example: say you bought a property for $275,000 and rented it out. Your yearly depreciation would then be price/27.5 = $10,000. That $10,000 is then a deduction from your rental income, before it is taxed. If your marginal tax rate is 25%, this results in $2,500 of taxes you don’t have to pay each year. You can treat this money as increased cash flow into your pocket, use it to pay down the mortgage, or invest it elsewhere. Very cool.

    Suppose you rent this property out for ten years. You have depreciated the property by $10,000/year, for a total depreciation of $100,000, and have saved $2,500 each year for a total of $25,000 of tax savings. Then, you sell the property. THis is when the depreciation comes back to get you. In the year you sell the property, ALL of the accumulated depreciation is recaptured. WHat this means is that you have to add it as income, on your income taxes for that year. If you are already in the 25% marginal income tax bracket, this means that that additional $100,000 income (which you don’t receive when you sell the property since it was recieved inprior years) is taxed at higher tax rates, some of it at 28%, some of it at higher tax rates.

    Lets assume that the marginal tax rate on the recaptured depreciation was 30%. Note that this is a higher tax rate than if you had just paid the taxes on the $10,000 of rental income each year. That means you have an extra $30,000 in taxes to pay, immediately, in the year you sell the house. Of course, $25,000 of that is taxes you didn’t pay in the ten years you were renting and depreciating the property. If you invested that $2,500 each year, and earned at least $5,000 on it over the ten years, then you may come out ahead. If you didn’t invest it, but used it as cash flow into your pocket, you have to find that $30,000 somewhere, probably from the sale proceeds from selling the house.

    If you kept the house as a rental for 28 years, the accumulated depreciation would equal the initial purchase price of the house. Selling it then would result in depreciation recapture of $275,000. I wonder what your effective marginal tax rate would be on $275,000 on additional income in the year you sell the house. OUCH. Yes, you can view depreciation as a loan from the IRS of the amount of taxes you would otherwise have to pay on that rental income each year. But it is not a zero interest loan. You pay back that deferred tax money at a higher tax rate.

    Of course, you can do a 1031 exchange, and transfer the accumulated depreciation to a new property.
    but, A) the rules for 1031 exchange are tricky to accomplish, B) you have to plan for the 1031 exchange ahead of time or it becomes nearly impossible to do in the allowed time frames C) you have to (I think) reinvest all of the money from the sale of the property into the new property, or pay some of the accumulated depreciation. I haven’t done a 1031 yet, and need to study it more. How does depreciation work on the new property? Is it’s basis reduced by the amount of accumulated depreciation that it inherited? if so, that would lower the depreciation on the new property, and affect it’s cash flow, right?

    My point is, that you need to understand depreciation, and take it into account when you are deciding to BRRRR a property. You need one or more exit strategies for that BRRRR property, and each strategy needs to take the recapture of depreciation into account.

    • John Leavelle

      Howdy Cindy,
      Your concern for depreciation recapture taxes applies to all rental investment strategies. It is my understanding that, along with Capitol Gains, it is why the 1031 exchange was created. As long as you roll it over into a similar investment within 180 days you should have no problem. I agree this takes planning to meet the deadline.
      The depreciation amount is not rolled over to the new property. It ends with the old one. Then you calculate the depreciation amount for the new property basis.
      Another thing you should consider if you keep a BRRRR property for long term is you will need to account for future Capital Expenses. This inturn will impact your depreciation amount. That is why I don’t plan on keeping any property more than 5 to 7 years.

  3. Andrew Syrios

    A very good summary! I would definitely recommend trying to find a private lender rather than going with a hard money lender. It’s much, much cheaper. I also think you need to have some money to do a BRRRR strategy. It CAN be no-cash down, but you just can’t rely on the appraisal (nor are you going to be 100% on getting a good enough deal).

  4. James Kandasamy

    Love BRRRR, on Seasoning, I have done 11 BRRRR and always refinance into conventional loan within 6 months. I am not sure whether it’s a Texas thing but I never had a lender that gives me a seasoning period requirement. I have dealt with 4-6 lenders for all the 11 properties.

    Now I am BRRRR’ing Apartments !

  5. Carrie Reyment

    We love the BRRRR! Our first deal was a BRRRR and it has set our business up for a lot of success moving forward. We had a private loan with a friend for part of the initial purchase and cashed in a roth ira of ours for the remainder and the rehab (only $6K mostly cosmetic updating rehab). It was rented when we bought it and the rents were under market so we raised rents within that time frame. We ended up getting it to appraise out for about $84K and we were all in to it for about $65K. We were able to get a line of credit on it for $63K that we then used for part of a purchase on a 4 plex we flipped and then used the line just recently to close on a property we are wholesaling. Great strategy and thank you to Brandon and the BP community for introducing us to BRRRR!

  6. Richard Andrade

    Could someone help me wrap my head around the refinance portion of BRRRR, that I guess I would consider as a con, if I’m thinking correctly? Here’s a simple example: Buy a property for $100k, assume 20% LTV, so putting $20k down, financing $80k. Rehab it, re-appraises for $125k. Now at this point, to refinance and cash out, you are faced with the con of a) paying closing fees on the cash out refi and b) the cash out refi now increases your outstanding loan balance from $80k to $100k. Which means your P&I payments a) reset, so your principal/interest ratios reset back to starting points that are now most favorable to the lender, and b) increase, so your monthly mortgage expense is now higher, hurting cash flow numbers moving forward.

    Now I understand the great advantage of freeing your cash in the refi, but I haven’t seen anyone mention the drawbacks I mentioned above. Am I right to think they exist or are they considered so minor in relation to the pro of cash out that they are not worth considering? Thanks!

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