BRRRR
Strategy

The core math

Target: 70% ARV all-in (purchase + rehab + closing + carry)

ARV × 75% = Refinance proceeds available
Refinance − All-in cost = Equity left in deal

Goal: all-in cost ≤ 75% × ARV
      → Refinance pulls 100% of capital back out
      → "Infinite return" on remaining cashflow

Practical target (for margin of safety):
      All-in ≤ 70% ARV
      → Refinance at 75% leaves 5% ARV as reserves

Example:
  ARV:                   $280,000
  Purchase:              $150,000
  Rehab:                  $40,000
  Closing + carry:         $8,000
  Total all-in:          $198,000 (70.7% of ARV)
  Refi at 75% ARV:       $210,000
  Capital recovered:     $12,000 back to pocket
  Capital left in:        $0 (positive recovery)

Monthly cashflow at $2,000 rent:
  PITI:                   $1,400
  Mgmt 8%:                  $160
  Vacancy 5%:               $100
  Maintenance:              $150
  Capex reserve:            $100
  Net cashflow:            $90/mo = $1,080/yr on $0 equity
  → Infinite ROI on trapped equity

Seasoning requirements

• Conventional (Fannie / Freddie). 6 months title seasoning required for cash-out refi at appraised value. Before 6 months, can only refi at purchase price + documented improvements (Delayed Financing Exemption).
• DSCR lenders. Varies: Kiavi 3-month seasoning, Lima One immediate on stabilized, Visio 6 months. Some offer "day-one cash-out" with premium pricing.
• Rent history. Most lenders require 2–3 months of executed lease and rent history. Some accept market rent (1007 appraisal) on vacant.
• Portfolio bank. Flexible based on relationship. Can refi same-day stabilized if sufficient down.

Delayed Financing Exemption (Fannie/Freddie): if you paid cash at acquisition, you can cash-out refi up to original cost basis within 6 months without waiting. Documentation: settlement statement, proof of cash closing, improvements receipts.

Funding the acquisition leg

• Cash. Cleanest, fastest. Delayed financing at 6 months recovers basis.
• HELOC on primary. Prime + 1–3% rate. IO during draw period. Pay back at refi.
• Hard money. 70–90% LTC, 10–13% rate, 2–4 points, 12-month term. Fast close, high carry cost. Budget accordingly.
• Private money. Friends/family/high-net-worth. 8–12% rate, terms negotiated.
• Bridge loan. Institutional bridge lender (CoreVest, Anchor Loans). 75–80% LTC, 9–11% rate, holdback for rehab draws.

Carrying cost during rehab directly impacts all-in basis. 4 months at $2,000/month financing cost is $8,000 of basis creep. Speed matters.

Rehab budget allocation

A BRRRR rehab targets ARV, not aesthetic perfection. Spend on what moves comps:

• Mechanical / structural (30–40% of budget). Roof, HVAC, electrical, plumbing, foundation. Not visible but permit-required and buyer-inspection killers.
• Kitchen and baths (25–35%). The rooms that drive appraisal and renter appeal. Mid-tier finishes: quartz or granite counters, Shaker cabinets, tile floors, LED lighting.
• Flooring + paint (15–20%). LVP whole house, neutral paint (Agreeable Gray, Repose Gray), new baseboards. Huge perceived-value lift for modest cost.
• Curb appeal (5–10%). Landscape, exterior paint, door, mailbox. Drives first-impression appraisal.
• Contingency (10–15%). Hidden damage, scope creep. Never zero.

Refinance underwriting

The refi is where BRRRR deals live or die. Three variables:

• Appraised value (ARV). Meet the appraiser. Provide comp packet with 3–5 renovated comps within 0.5 miles, < 6 months old. Expect 2–5% haircut from your pro forma.
• Lender DSCR. At stabilized rent, must clear 1.15–1.25x. If not, refi proceeds cap at lower amount.
• LTV cap. 75% is standard DSCR cash-out. 70–72% for small multifamily. Some lenders 80% at lower DSCR floor.

BRRRR killers

• Rehab overrun. Budget $40k, actual $55k. All-in moves from 70% to 78% ARV. Refi doesn’t recover capital. Contingency and fixed-bid contracts minimize this.
• Low appraisal. ARV $280k projected, $245k appraised. 75% LTV refi drops from $210k to $184k. $26k of capital stranded. Comp packet and appraiser meeting help, but some markets have appraiser conservatism you can’t overcome.
• Rate shift. Acquisition-to-refi cycle is 4–6 months. Rate can jump 100 bps, turning your projected cashflow negative. Lock rate early with float-down options where available.
• Rehab delay. Permits stuck in city review. Contractor bailed. Inspection failed twice. Each month adds holding cost and seasoning pushout.
• Market softening. ARV comps declined 5% during your 4-month hold. Appraisal follows comps. BRRRR math assumes static market; build in 5% margin.
• Tenant placement delay. Stabilized appraisal often requires 60–90 day executed lease. Vacant property during ramp = additional PITI.
• Reserves drained. BRRRR operators deploy all capital into next deal immediately. Any surprise (capex, vacancy, eviction) with no reserves = crisis.

Portfolio math — why it compounds

One successful BRRRR recycles $100k. Do 4 in a year, each returning 100% capital, and you own 4 cashflowing rentals on the original $100k. Year 2: 4 more deals. The constraint is not capital — it’s execution capacity (contractor bandwidth, deal flow, lender relationships, tenant management).

Real-world BRRRR operators scale through: acquisition manager for deal flow, contractor crew on salary or priority-of-work agreement, property management in place before first acquisition, multiple DSCR lender relationships so capacity isn’t single-lender constrained, and ruthless systems for draw inspections and punchlists.