BRRRR vs Fix and Flip
Fix and flip and BRRRR both start the same way: buy a property below its after-repair value and renovate it. A flipper then sells, turning the added value into a one-time profit within months. A BRRRR investor rents the property, refinances against the higher value to pull cash back out, and keeps it for ongoing cash flow and appreciation.
BRRRR vs Fix and flip side by side
| BRRRR | Fix and flip | |
|---|---|---|
| Exit | Refinance and hold as a rental | Sell after the renovation |
| How you get paid | Cash returned at refinance, then monthly cash flow and appreciation | One lump-sum profit at sale |
| Time horizon | Years | Usually months |
| Typical financing | Short-term purchase/rehab loan, then a long-term refinance | Cash, hard-money or short-term rehab loan |
| Key number | Appraised after-repair value and rent | Sale price after selling costs |
| Biggest risks | Low appraisal, rate rises, landlord problems | Market softening, overruns, slow sale |
| Selling costs | None until you eventually sell | Commission, transfer taxes and concessions at sale |
Full definitions: BRRRR, Fix and Flip.
When each strategy fits
Flipping suits investors who want their capital back quickly, prefer not to manage tenants and are working in a market where buyers pay up for renovated homes. It depends heavily on accurate renovation budgets and resale comparables.
BRRRR suits investors building a long-term portfolio who can manage or hire management, have reserves for vacancies and repairs, and buy where rents comfortably cover a long-term mortgage at the financing terms actually available to them.
Where the money differs
- A flip pays selling costs - commission, transfer taxes, concessions - which can consume a large share of the margin.
- BRRRR avoids selling costs but adds refinance closing costs, and leaves some cash "stuck" if the appraisal or the lender's maximum loan-to-value falls short.
- Holding costs (interest, taxes, insurance, utilities) hurt a flip directly; on a BRRRR they continue until the refinance, then rent covers them.
- Tax treatment differs between a property held for resale and one held as a rental; get tax advice before choosing.
The BRRRR cycle: buy, rehab, rent, refinance, repeat
BRRRR recycles your cash: a renovation raises the value, a cash-out refinance at that value returns money, and that money funds the next deal.
- All-in cost
- $210,000
- Cash returned at refinance
- $205,000
- New loan $210,000
- Cash left in the deal
- $5,000
- Not fully recycled
- Cash flow after refinance
- −$139/mo
- Negative
- 1 of 5 →Buy$150,000Purchase below market, often with cash or a short-term loan.
- 2 of 5 →Rehab$60,000Renovate to raise the value, plus closing and holding costs.
- 3 of 5 →Rent$2,200/moStabilize with a tenant at market rent.
- 4 of 5 →Refinance$210,000Cash-out loan at 75% of the appraised value.
- 5 of 5 ↺ back to 1Repeat$205,000Recycle the cash returned into the next property.
- After the refinance the property loses about $139 a month.
- $5,000 of your cash stays in the property after the refinance.
- The appraisal may come in below your ARV, returning less cash.
- Many lenders require 6 to 12 months of ownership before a cash-out refinance uses the new value.
Formula
All-in = Purchase + Rehab + Closing and holdingCash returned = ARV × Refinance LTV − Refinance costsCash left in = All-in − Cash returnedAssumptions
- 30-year fixed refinance; operating costs entered as one monthly figure.
- Short-term financing costs during the rehab are part of holding costs.
Worked example: the same house, two exits
Flip or BRRRR the same $200,000 house
Illustrative example - round numbers, not current market data. Calculated with Reaixo's calculator engines.
Assumptions
- Purchase and rehab
- $200,000 + $50,000
- Buying closing costs and holding costs
- $6,000 and $9,000
- After-repair value
- $320,000
- Flip: selling costs
- 8% of the sale price
- BRRRR: refinance
- 75% of ARV at 7.50%, 30 years; $7,000 refinance costs
- BRRRR: rent and operating expenses
- $2,900 a month; expenses 40% of rent
| Step | Calculation | Result |
|---|---|---|
| 1. All-in cost (both strategies) | $200,000 + $50,000 + $6,000 + $9,000 | $265,000 |
| 2. Flip: net profit before tax | $320,000 × (1 − 8%) − $265,000 | $29,400 |
| 3. BRRRR: new loan | $320,000 × 75% | $240,000 |
| 4. BRRRR: cash left in the deal | $265,000 + $7,000 − $240,000 | $32,000 |
| 5. BRRRR: annual cash flow after the refinance | $20,880 NOI − $20,137 debt service | $743 |
Flip profit vs BRRRR cash left in / yearly cash flow: $29,400 vs $32,000 / $743. The flip turns the work into about $29,400 of one-time profit within months. BRRRR leaves $32,000 in a property that pays about $743 a year and keeps any appreciation, but adds a 30-year loan and landlord work. By the 70% rule, the most this buyer should pay is $174,000; the $200,000 price is inside that.
What this calculation leaves out
- Before income tax. A property held for resale and one held as a rental are taxed differently; get tax advice.
- The refinance depends on the appraisal: a lower ARV leaves more cash in the deal.
- Rent and expense ratios are illustrative; use real rent comparables and a full expense budget.
Common misconceptions
- BRRRR always gets all your cash back. That needs a high appraisal and a lender willing to lend a high share of it; often some cash stays in.
- Flips are quick money. Permits, contractor delays and a slow sale can stretch holding costs for months.
- The 70% rule guarantees profit. It is a screening rule of thumb; real budgets and comparables decide the deal.
Frequently asked questions
Is BRRRR better than flipping?
Not for every investor. BRRRR builds long-term wealth and income but ties up capital and adds landlord risk; flipping returns capital quickly but each deal must be found and executed again.
Can a flip turn into a BRRRR?
Yes. If the resale market softens, investors often rent and refinance instead, provided the rent supports a long-term loan.
What does the refinance in BRRRR depend on?
Mainly the appraised after-repair value, the lender's maximum loan-to-value and any seasoning period the lender requires before using the new value.
Calculators and guides
Recommended next step
Test ARV, rehab budget and both exits on a real address.
Analyze a fix-and-flip property →Sources and review
No regulator defines these terms; the page follows common industry practice and labels rules of thumb as such.
Where this applies: Not regulated. Investment ratios are industry conventions; lenders and analysts may define the inputs differently, so always check how a figure was calculated.
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Worked examples use illustrative round numbers, not current market data. Rates, limits and program rules change - confirm current figures with your lender or a qualified professional.
General educational information, not financial, legal, tax or real estate advice. Rules vary by loan program, transaction and location - verify important decisions with qualified professionals.