Question 1

What is the BRRRR method?

Accepted Answer

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. You purchase a distressed property below market value, renovate it to force appreciation, rent it to qualify for a cash-out refinance, then use the proceeds to fund your next deal. The goal is to recycle your capital — ideally recovering 80-100% of your investment through the refinance.

Question 2

What LTV can I get on a BRRRR refinance?

Accepted Answer

Most investment property lenders offer 70-75% LTV on cash-out refinances (Fannie Mae caps at 75% for 1-4 unit rentals). Some portfolio lenders and DSCR loan programs offer 80% LTV. To maximize capital recovery, your rehab must create sufficient equity — buying at 65-70% of ARV before repairs is a common target.

Question 3

What is DSCR and why does it matter?

Accepted Answer

The Debt Service Coverage Ratio (DSCR) measures how much rental income covers your mortgage payment. DSCR = Net Operating Income ÷ Annual Debt Service. Most lenders require a DSCR of 1.20 or higher, meaning your rental income exceeds the mortgage by at least 20%. A DSCR below 1.0 means the property doesn't cover its own mortgage.

Question 4

How do I calculate the Maximum Allowable Offer?

Accepted Answer

MAO = (ARV × LTV%) − Rehab Costs − Buying Closing Costs − Holding Costs − Refi Closing Costs. If ARV is $220k at 75% LTV, you have $165k from refinance. Subtract all costs to find the maximum you can pay and still recover your capital. This formula ensures the deal works mathematically before you make an offer.

BRRRR Calculator