Updated October 2026 with a full worked example and current Connecticut financing terms.
The BRRRR method is how a lot of small investors go from one rental to five without saving up five down payments. The idea is simple. The hard part is the math between the steps, and that is where most explanations stop.
This guide walks through each step, shows the numbers on a real-size deal, and covers the two places BRRRR deals usually break: the rehab budget and the refinance.
The short version: BRRRR stands for buy, rehab, rent, refinance, repeat. You buy a property below what it will be worth once it is fixed, renovate it, rent it out, then do a cash-out refinance based on the new appraised value to pull most or all of your cash back out. That cash funds the next deal.
BRRRR is a buy-and-hold rental strategy with a built-in way to get your money back. In a normal rental purchase, your down payment stays locked in the property. With BRRRR, you force the value up with a renovation, then borrow against that higher value.
When it works, you end up owning a rented property with little or none of your own cash left in it. When it doesn't, the usual reason is that the appraisal came in low or the rehab ran over, so more of your money stays in the deal than you planned.
If you only want the rental and not the renovation, a straight buy-and-hold purchase is simpler. BRRRR is for investors who are comfortable managing a rehab.
Everything starts with the after-repair value, or ARV: what the property will appraise for once the work is done. Get a conservative ARV from sold comps, not list prices, before you make an offer.
A common rule of thumb is to keep your purchase price plus rehab at or under 75% of ARV. That number is not random. Most cash-out refinances on investment property top out around 75% of the appraised value, so if your all-in cost is above that line, some of your cash stays in the deal no matter what.
The strongest BRRRR candidates are usually the ones a regular buyer can't finance: a gutted kitchen, a failed roof, drywall damage. Those problems scare off retail buyers and push the price down, but they are often fixable for a known cost.
Spend money where an appraiser and a tenant will notice it. A new roof, working systems, a clean kitchen and bathroom, and an added bedroom can move the appraised value. High-end finishes usually don't pay back on a rental.
Most investors fund the purchase and the rehab with one short-term fix-and-flip loan. These are business-purpose loans for investment property only, sized on the purchase price, the rehab budget and the ARV. The rehab money is released in draws as work is completed.
The refinance lender will look at the rent, so lease the property before you apply. Screen tenants on income, credit, rental history and references, and follow Connecticut's fair housing rules.
The 1% rule is a quick screen many investors use: monthly rent of about 1% of your all-in cost. In much of Connecticut, a 1% deal is rare at today's prices, so treat it as a first filter. What actually matters for the refinance is whether the rent covers the new loan payment, taxes, insurance and any association dues.
This is the step that makes BRRRR work. You apply for a cash-out refinance, the appraiser values the finished, rented property, and the new loan pays off the short-term rehab loan. Anything left over comes back to you.
Many Connecticut investors use a DSCR loan for the refinance. It qualifies the property on its rent compared with the payment, not on your personal income, so tax write-offs and a thin W-2 history don't block the cash-out.
Two questions decide how much cash you get back:
Take the cash from the refinance and do it again. The second deal goes faster because you already have a contractor, a property manager, a lender and a system for estimating rehab costs. Write down what went wrong on deal one so it doesn't happen on deal two.
National BRRRR examples often use $90,000 houses. Connecticut isn't that market. Here is the same cycle on a two-family at a Connecticut price point. These are illustrative figures to show the math, not a quote.
In this example, most or all of your cash comes back, and you own a rented two-family worth $500,000 with a $375,000 loan on it. If the appraisal came in at $460,000 instead, 75% would be $345,000, and only about $32,000 would come back. That is why a conservative ARV matters more than any other number in the deal.
For the full version of this deal, including rents and the DSCR test, see the BRRRR method in Connecticut with real numbers.
Line up the refinance before you buy, not after the rehab. If you're already in a hard money loan that is coming due, we can look at refinancing it into a DSCR loan.
The refinance is sized off the appraisal, so a low number leaves cash in the deal. Use sold comps that match the finished property, give the appraiser a list of the work done with receipts, and ask for an interior appraisal.
Over budget is more common than under. Price the scope before you buy, carry a contingency, and keep the draw schedule tied to real milestones.
Short-term rehab loans cost more than a long-term mortgage, and interest is usually paid monthly. Every month of delay in the rehab, the leasing or the refinance adds to what you leave in the deal. Build at least one extra month into your numbers.
If your refinance lender requires twelve months of ownership and your rehab loan is shorter, you have a problem. Fix-and-flip terms commonly run 6 to 18 months. Match the term to a realistic timeline and ask your refinance lender for its seasoning rule up front.
Until the unit is rented, you carry the full cost with no income. Know your local rents before you buy and start marketing the unit before the rehab is finished.
It is a poor fit if you need the property to pay you from day one, can't absorb a rehab surprise, or want a hands-off investment. In those cases a turnkey rental or a plain buy-and-hold is the better path.
Planning a BRRRR? Start with a quote. It takes about 2 minutes, with no Social Security number and no hard credit pull. See your options here, and we'll look at both the rehab loan and the refinance before you make an offer.
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Buy, rehab, rent, refinance, repeat. You buy a property below its after-repair value, renovate it, rent it out, refinance based on the new appraised value to pull your cash back out, and use that cash on the next property.
Enough to cover the part of the purchase your rehab loan doesn't fund, plus points, closing costs and a few months of interest and holding costs. On a fix-and-flip loan that covers 80% of the purchase and 100% of the rehab, that is roughly 20% of the purchase price plus costs.
The after-repair appraised value of the finished, rented property, not what you paid. On a DSCR cash-out refinance, the loan can go up to 75% of that value.
It depends on the lender's seasoning rule. Some require six or twelve months of ownership. AFC has no seasoning requirement on the BRRRR cash-out refinance when the property was renovated, so the DSCR loan can close once the work is finished and the unit is leased.
It can be, but the margin is thinner than it was when prices and rates were lower. The deals that work today are bought well below ARV and pass the rent test on the refinance payment. Run the numbers at a conservative appraisal before you commit.
A flip sells the property after the rehab to take the profit. BRRRR keeps the property as a rental and refinances to pull your cash out. Both usually start with the same short-term rehab loan; the exit is different.
Written by Gaetano Ciambriello, CEO of AFC Mortgage Group (NMLS #1783508).
AFC Mortgage Group LLC | NMLS #2801 | Monroe, CT | Equal Housing Lender.
This article is for educational purposes only and is not a commitment to lend. It does not quote or guarantee any rate, term, or approval, and it does not constitute financial, tax, or legal advice. Program guidelines, terms, and availability vary and are subject to change. All loans are subject to credit approval, property approval, and Approval Team review.
Business-purpose and investment-property loans are offered through AFC Credit Partners and are not available for owner-occupied properties.
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