The BRRRR strategy with a real example

The deal

Purchase: $120,000 (off-market, distressed SFR)
Rehab: $40,000 (kitchen, bath, paint, flooring, mechanicals)
ARV: $230,000 (verified by 3 recent comps within 0.5 miles)
Financing: 80% acquisition loan via hard money at 10%, 6-month rehab + lease-up hold

The phases

Phase 1: Acquisition

Line	Amount
Down payment (20%)	$24,000
Closing costs (3%)	$3,600
Rehab budget	$40,000
Hard money interest ($96k × 10% × 6mo)	$4,800
Holding expenses ($400/mo × 6mo)	$2,400
Initial cash invested	$74,800

Note: hard money is interest-only during the hold. The $96k principal gets paid off at refi.

Phase 2: Refinance (after rehab + 2 months seasoning)

Conventional cash-out refi at 75% LTV of the new appraised ARV.

Line	Amount
Refi loan (75% × $230k)	$172,500
Pay off acquisition loan	−$96,000
Refi closing costs (3%)	−$5,175
Cash returned at refi	$71,325
Cash left in deal ($74,800 − $71,325)	$3,475

Almost a full BRRRR — you started with $74,800 of capital and ended with $3,475 in the deal. The other $71,325 is back in your pocket, ready to redeploy.

Phase 3: Steady-state rental

Now you own a stabilized rental at the new $172,500 mortgage:

Line	Monthly
Rent	$1,900
Less vacancy (5%)	−$95
Less operating expenses	−$700
Less new P&I @ 7.5%/30yr	−$1,206
Monthly cash flow	−$101

This is where most BRRRRs in 2024-2025 get tricky — the refinance rate is high enough that even a "successful" BRRRR can produce thin or negative cash flow.

The lesson

A "successful" BRRRR isn't just about getting your money back. It's about getting your money back and owning a property that still cash flows at the new refi payment. In a 4% rate environment this deal cash flows nicely. At 7.5%, it doesn't.

When you screen BRRRR deals today, run the refi cash flow scenario first. If it doesn't pencil at conservative refi rates, walk — no matter how good the rehab arbitrage looks.

Try your own deal

Plug your numbers into the BRRRR Calculator. Pay attention to two things: cash left in deal (do you recycle your capital?) and monthly cash flow (does the stabilized property still pay you?). If either is bad, the deal is bad.