BRRRR, Buy, Rehab, Rent, Refinance, Repeat: is a capital-recycling strategy. You force value through renovation, then pull that value out with a refinancing so the same cash can fund the next project. The concept is sound; the execution lives and dies on arithmetic discipline.
The cycle in numbers
Buy at $180,000, spend $45,000 on renovation plus $13,000 of acquisition and holding costs: $238,000 invested. The home appraises at $295,000 after repair (the ARV). A 75% LTV refinance yields a $221,250 loan; after $4,500 of fees, $216,750 comes back out. Only $21,250 stays in the deal.
The rented property produces $300/month after operating expenses and the new mortgage, $3,600/year. On the $21,250 left in, that's a 16.9% cash-on-cash return, with $73,750 of equity remaining in the property. Those are the numbers that make BRRRR attractive.
Where it breaks
- The appraisal comes in low. The refinance loan is LTV × appraised value, a $270,000 appraisal at 75% shrinks your recovery by ~$18,750, and that money stays stuck in the deal.
- Refinance approval isn't guaranteed. Lender rules, your financials and market conditions at that moment decide. The calculator's proceeds are projections, never promises.
- Rehab overruns. Every dollar over budget either comes from reserves or stays in the deal after refinance.
- Carrying time. Holding costs accrue monthly; slow contractors are a financial event.