The BRRRR Strategy Explained: How to Build a Rental Portfolio Using Other People's Money
The BRRRR Strategy Explained: How to Build a Rental Portfolio Using Other People's Money
The BRRRR strategy is one of the most powerful wealth-building methods in real estate investing. It stands for Buy, Rehab, Rent, Refinance, Repeat — and when executed correctly, it allows investors to recycle the same capital over and over to build a growing portfolio of cash-flowing rental properties.
What Is the BRRRR Strategy?
BRRRR is a systematic approach to building a rental portfolio by:
- Buy a distressed or undervalued property at below-market price
- Rehab the property to increase its value
- Rent the property to generate cash flow
- Refinance with a DSCR loan to pull out your invested capital
- Repeat the process with the recycled capital
The key insight: if you buy and renovate correctly, the refinance can return all or most of your initial investment — meaning you've acquired a cash-flowing rental property with little to no money left in the deal.
Step-by-Step BRRRR Example
Let's walk through a real example in Phoenix, Arizona:
Step 1: Buy
- Purchase price: $220,000 (distressed property)
- Hard money loan: $198,000 (90% of purchase)
- Cash at closing: $22,000
Step 2: Rehab
- Renovation budget: $45,000
- Hard money covers 100% of rehab
- Total project cost: $265,000
Step 3: Rent
- After renovation, property rents for $2,200/month
- Market value after renovation (ARV): $340,000
Step 4: Refinance
- DSCR loan at 75% of ARV: $255,000
- Pay off hard money loan: $243,000
- Cash returned to investor: $12,000
- Net cash left in deal: $10,000
Step 5: Repeat
- Monthly cash flow: ~$400–$600/month
- Capital recycled: ~$55,000 returned to deploy on next deal
The Financing Stack for BRRRR
BRRRR requires two types of financing:
Phase 1: Hard Money Loan (Buy + Rehab)
- Fast closing (7–14 days) to win competitive deals
- Finances purchase + renovation
- Short-term (12–18 months)
- Higher rates (9.99%–13%)
Phase 2: DSCR Loan (Refinance + Hold)
- Long-term (30-year fixed or ARM)
- Qualifies based on rental income (no W-2 required)
- Lower rates (7%–9.5%)
- Cash-out refinance returns your invested capital
Keys to a Successful BRRRR
1. Buy at the Right Price
The deal is made at acquisition. You need to buy at a significant discount to ARV to ensure the refinance returns your capital. A common rule: purchase + rehab should equal 70–75% of ARV.
2. Accurate Renovation Budget
Cost overruns are the #1 killer of BRRRR deals. Get multiple contractor bids and add a 10–15% contingency buffer.
3. Strong Rental Market
The property needs to generate enough rent to qualify for DSCR refinancing. Research local rents before you buy.
4. Seasoning Requirements
Most DSCR lenders require 3–6 months of ownership before a cash-out refinance. Plan your timeline accordingly.
5. Work with the Right Lenders
You need a hard money lender who closes fast and a DSCR lender who can execute the refinance efficiently. Barrett Financial Group offers both.
BRRRR in Different Markets
| Market | Entry Price | ARV | Monthly Rent | BRRRR Viability |
|---|---|---|---|---|
| Phoenix, AZ | $200K–$280K | $300K–$380K | $1,800–$2,400 | Excellent |
| Las Vegas, NV | $220K–$300K | $320K–$420K | $1,900–$2,600 | Strong |
| Denver, CO | $280K–$380K | $380K–$500K | $2,200–$3,000 | Good |
| Los Angeles, CA | $450K–$700K | $600K–$900K | $2,800–$4,000 | Challenging (thin margins) |
| Seattle, WA | $400K–$600K | $550K–$800K | $2,500–$3,500 | Moderate |
Frequently Asked Questions
How much money do I need to start a BRRRR deal?
Typically $20,000–$50,000 for the down payment on a hard money loan, plus reserves. The goal is to get most of this back in the refinance.
How long does a BRRRR cycle take?
Typically 6–12 months from purchase to refinance: 2–4 months for renovation, 1–2 months to stabilize with a tenant, then 30–45 days for the DSCR refinance.
What credit score do I need for BRRRR?
620 minimum for most hard money and DSCR programs. Higher scores get better rates.
Can I do BRRRR in an LLC?
Yes. Both hard money loans and DSCR loans are available for LLCs.
What if the DSCR refinance doesn't return all my capital?
This is called "leaving money in the deal." It's not ideal, but if the property cash flows and you've built equity, it can still be a good investment.
Ready to Execute Your First BRRRR Deal?
Barrett Financial Group provides both the hard money loan (for the buy + rehab phase) and the DSCR loan (for the refinance + hold phase) across Arizona, California, Washington, Nevada, and Colorado.
Get Pre-Approved for Your BRRRR Strategy — Free consultation, no obligation.