BRRRR stands for buy, rehab, rent, refinance, repeat. The idea is to buy a distressed property, renovate it, rent it out, then refinance to pull your cash back out and do it again. The strategy only works if the financing fits each stage, because the loan you use to buy and renovate is not the loan you want to hold long term.
Step 1 and 2: Buy and rehab with short-term financing
A property that needs work usually cannot qualify for a standard long-term loan, and sellers of distressed properties often want a quick close. That is where short-term investor financing comes in:
- Fix and flip loans typically fund the purchase and release rehab money in draws as the work is done.
- Bridge loans give you a fast close now, with a plan to refinance or sell later.
These loans are short by design, often a year or so, with interest-only payments. The goal is to finish the work and refinance before the term ends.
Step 3: Rent
Once the work is done, get the property leased. A signed lease at a market rent is what supports the next step, so leave time in the plan to find a tenant.
Step 4: Refinance into a DSCR loan
A DSCR refinance replaces the short-term loan with long-term financing based on the property’s rent. If the new value is high enough, the new loan may repay the short-term loan and return some or all of your cash. This is where the numbers have to work: the rent must cover the new payment, and the loan size depends on the appraised value after the rehab.
Step 5: Repeat
With your capital freed up, you can do it again. Keep in mind that lenders may require the property to be owned for some period before certain refinances, and that cash-out leverage is usually lower than purchase leverage. Ask about this before you build a plan around it.
Where BRRRR deals go wrong
- Underestimating the rehab budget or timeline.
- Overestimating the after-repair value so the refinance does not return as much cash as planned.
- Rent that does not cover the new payment, especially with high taxes and insurance.
- No exit if the refinance falls short. Know your backup before you close the first loan.
Plan the whole sequence up front
It helps to talk through both loans with one lender before you buy. Get a quote and a loan officer can help you check the short-term loan and the DSCR refinance together.