Buy, Rehab, Rent, Refinance, Repeat – the BRRRR strategy built countless real estate portfolios during the low-rate era. But with interest rates above 6% and California's unique market dynamics, is BRRRR dead or just evolving?
The BRRRR Reality Check
Let's be honest: BRRRR at 3% rates was easy mode. Buy anything, paint it beige, refinance at astronomical valuations, repeat.
Those days are gone. Today's BRRRR requires surgical precision, realistic projections, and creative financing. But here's the thing – it still works if you adapt.
The New BRRRR Math
Traditional BRRRR assumed you'd refinance out 100% of your capital. Today's reality:
Old BRRRR (2020):
- Purchase: $200,000
- Rehab: $30,000
- ARV: $300,000
- Refinance at 75% LTV: $225,000
- Cash left in deal: $5,000
New BRRRR (2025):
- Purchase: $200,000
- Rehab: $30,000
- ARV: $280,000 (conservative valuations)
- Refinance at 65% LTV: $182,000
- Cash left in deal: $48,000
You won't pull all your money out, but leaving $48,000 in a cash-flowing property beats not investing at all.
California Markets Where BRRRR Lives
Inland Empire Winners:
- Bakersfield: Properties at 60-70% of peak values
- Stockton: Strong rental demand, improving fundamentals
- Fresno: Growing population, affordable entry points
- San Bernardino: Path of progress development
These markets offer the value-add opportunities BRRRR requires. Coastal markets? Unless you find an incredible off-market deal, BRRRR is nearly impossible.
The Modified BRRRR Playbook
Step 1: Buy with Hard Money
- Target properties 20-30% below ARV
- Focus on cosmetic repairs, not structural issues
- Close fast (5-7 days) to beat competition
- Initial loan: 65-70% of purchase price
Step 2: Rehab Strategically
- Budget $15-25 per square foot for cosmetic updates
- Focus on kitchens, bathrooms, and curb appeal
- Add value through unit reconfiguration if possible
- Timeline: 60-90 days maximum
Step 3: Rent at Market Rates
- Price slightly below market for fast occupancy
- Screen tenants thoroughly (vacancy kills BRRRR)
- Document everything for refinance underwriting
- Achieve 90%+ occupancy before refinancing
Step 4: Refinance Creatively
- Don't wait for perfect rates
- Consider portfolio lenders or credit unions
- Accept 65-70% LTV as the new normal
- Focus on cash flow, not maximum extraction
Step 5: Repeat with Realistic Expectations
- Plan for 60-70% capital recovery, not 100%
- Build reserves for multiple projects
- Scale gradually, not aggressively
BRRRR Success Factors in 2025
Property Selection Criteria:
- Purchase price 70% or less of ARV
- Cosmetic repairs only (no foundations!)
- Strong rental market fundamentals
- Multiple exit strategies available
Financial Requirements:
- Six months reserves per property
- Access to $50-100K liquid capital
- Relationships with multiple lenders
- Realistic cash flow projections
The BRRRR-Adjacent Strategies
BRRRR-Hold: Accept that some capital stays in deals. If the property cash flows $500/month with $50,000 trapped, that's 12% cash-on-cash return. Not bad.
BRRRR-Flip: Can't refinance favorably? Sell instead. Take profits, redeploy into next deal. The repeat part doesn't require holding everything.
BRRRR-Partner: Bring in partners for the trapped capital. You keep property management fees and upside, they get preferred returns.
Real BRRRR Example (2024)
Fresno 4-Unit:
- Purchased: $380,000 (hard money)
- Renovation: $45,000
- All-in cost: $425,000
- ARV: $520,000
- Rents increased: $600/unit to $850/unit
- New monthly cash flow: $1,400
- Refinanced at 65% LTV: $338,000
- Capital trapped: $87,000
- Annual return on trapped capital: 19.3%
- Not perfect, but profitable.
Why BRRRR Isn't Dead
- California still has inefficient markets with opportunity
- Renovation arbitrage remains strong
- Rental demand continues growing
- Interest rates will eventually moderate
- Forced appreciation through improvement works
When to Avoid BRRRR
- Properties needing structural work
- Markets with declining populations
- When you need immediate liquidity
- If you can't handle tenant management
- Without adequate reserves
The BRRRR strategy requires evolution, not abandonment. Success comes from adapting the model to current realities, not waiting for yesterday's conditions to return.
At Capital Direct Funding, we provide the acquisition and bridge financing that makes BRRRR possible in today's market.
We understand the strategy and structure our loans accordingly.
Ready to BRRRR in today's market?
Call Capital Direct Funding at (626) 796-1680 or visit capitaldf.com