BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. You purchase a distressed property, renovate it, place a tenant, then refinance to pull out your initial investment. This allows you to recycle capital into the next deal.

Most BRRRR investors target 8-12% cash-on-cash return after the refinance. Some markets support higher returns, while appreciation-focused markets may have lower cash flow but better long-term gains.

Most lenders require 20-25% equity remaining after the cash-out refinance. This means your loan-to-value (LTV) ratio should be 75-80% of the after-repair value.

Lenders typically require a Debt Service Coverage Ratio (DSCR) of at least 1.20-1.25. This means your net operating income should be 20-25% higher than your debt payments.

Cap rate = Net Operating Income (NOI) / Purchase Price. A 6-8% cap rate is typical in most markets. Higher cap rates indicate higher risk/reward, while lower cap rates are common in appreciating markets.