BRRRR lets you pull your cash back out of a rental and reuse it. A worked example shows why the refinance, not the purchase, decides whether it works.
DealWorthIQ Team · 2026-09-28
BRRRR stands for buy, rehab, rent, refinance, repeat. You buy a property that needs work, force its value up with a renovation, place a tenant, then refinance on the new appraised value to recover most or all of the cash you put in. That recovered cash funds the next deal.
The strategy is simple to describe. Where investors get caught out is the refinance, because the new lender, not you, decides how big the loan can be.
Suppose you buy a house for $150,000 with $4,000 in closing costs, spend $50,000 on the rehab, and carry $8,000 in interest, taxes, insurance, and utilities until the refinance. Your all-in cost is $212,000.
All-in cost = purchase + closing costs + rehab + holding costs until refinance
After the rehab the house rents for $2,300 a month, or $27,600 a year. Allow 5% for vacancy ($1,380) and $8,400 a year for taxes, insurance, maintenance, management, and capital reserves. Net operating income (NOI) is $17,820.
NOI = annual rent − vacancy − operating expenses
The house appraises at $280,000. A lender offering 75% loan-to-value would lend up to $210,000. Net of $5,000 in refinance closing costs, that returns $205,000 and leaves only $7,000 of your money in the deal. On paper, a near-perfect BRRRR.
But at 7.25% over 30 years, a $210,000 loan costs about $17,190 a year. That is a debt service coverage ratio (DSCR) of just 1.04: the rent barely covers the mortgage. Many rental lenders want a DSCR of 1.20 to 1.25 or higher, so they will cap the loan well below the LTV limit.
DSCR = NOI ÷ annual debt service
At a 1.20 minimum, the largest annual payment the lender allows is $17,820 ÷ 1.20 = $14,850, which supports a loan of roughly $181,400. After closing costs you get back about $176,400, so $35,600 stays in the deal. Cash flow is $2,970 a year, an 8.3% cash-on-cash return on the money left in.
That is still a good rental. It is just not the infinite-return deal the LTV math promised, and you need $28,600 more of your own cash to do it than you planned.
The takeaway: a BRRRR deal is really a rental deal with a construction phase in front of it. If the rent does not support the refinance loan, the cash does not come back out.
BRRRR calculator: See how the calculator sizes the refinance against both LTV and DSCR, with a sample deal and the formulas behind it.