Key Takeaways
- BRRRR financing transitions from hard money (acquisition/rehab) to permanent DSCR or conventional (long-term hold).
- Capital recovery depends on the spread between total cost and the refinance loan amount (75% of appraised value).
- Even when 100% cash recovery is not achieved, BRRRR produces strong cash-on-cash returns and significant equity positions.
- DSCR refinance bypasses personal income qualification—the property's rent covers the debt service at 1.25+ ratio.
This case study follows the complete financing execution of a BRRRR (Buy, Rehab, Rent, Refinance, Repeat) deal from acquisition through cash-out refinance. The case demonstrates how to structure financing across multiple lenders and optimize each stage for maximum capital efficiency.
Case Context: The BRRRR Deal Structure
An investor in Kansas City identified a distressed property with: purchase price of $95,000 (ARV $165,000), estimated rehab budget of $35,000, total investment of $130,000, and projected monthly rent of $1,350. The investor's goal: complete the BRRRR cycle and recover 100% of the initial cash investment through refinancing. The financing plan: acquire with a hard money loan (80% of purchase at 12%), fund rehab through construction draws, refinance into a DSCR loan at 75% of appraised value after rehab, and use the cash-out proceeds to fund the next deal.
Financing Execution at Each Stage
Stage 1 — Acquisition: Hard money loan of $76,000 (80% of $95K purchase) at 12% interest, 2 points origination ($1,520). Investor cash at closing: $19,000 down + $1,520 points + $2,500 closing costs = $23,020. Stage 2 — Rehab: Hard money construction draws totaling $35,000 disbursed in 3 draws tied to completion milestones. Total cash invested: $23,020 + approximately $5,000 in holding costs during 4-month rehab = $28,020. Stage 3 — Rent: Property rented at $1,350/month within 3 weeks of rehab completion. Stage 4 — Refinance (month 7): Appraisal came in at $168,000. DSCR loan at 75% LTV = $126,000 loan amount at 7.5% interest, 30-year term. Monthly payment: $881. DSCR: $1,350 / $881 = 1.53 (well above 1.25 requirement). Cash-out proceeds: $126,000 - $111,000 (hard money payoff) - $3,500 (closing costs) = $11,500.
Results and Cash Position Analysis
Total cash invested: $28,020. Cash recovered at refinance: $11,500. Net cash remaining in deal: $16,520. While the investor did not recover 100% of the investment (which would require 75% LTV to equal or exceed total cost), the deal was still highly successful. Monthly cash flow: $1,350 rent - $881 mortgage - $150 taxes/insurance - $135 vacancy/maintenance reserves = $184/month. Cash-on-cash return: $2,208 annual cash flow / $16,520 cash invested = 13.4%. Equity position: $168,000 value - $126,000 loan = $42,000 in equity. The investor recycled $11,500 toward the next acquisition, needing only $16,520 of fresh capital for a property worth $168,000.
Key Takeaways
- ✓BRRRR financing transitions from hard money (acquisition/rehab) to permanent DSCR or conventional (long-term hold).
- ✓Capital recovery depends on the spread between total cost and the refinance loan amount (75% of appraised value).
- ✓Even when 100% cash recovery is not achieved, BRRRR produces strong cash-on-cash returns and significant equity positions.
- ✓DSCR refinance bypasses personal income qualification—the property's rent covers the debt service at 1.25+ ratio.
Sources
- Mortgage Bankers Association(2025-01-15)
- CFPB — TILA-RESPA Integrated Disclosure(2025-01-15)
Common Mistakes to Avoid
Copying case study tactics exactly without adapting to specific business context and market conditions.
Consequence: Tactics that worked in one situation may fail under different conditions, wasting resources and creating setbacks.
Correction: Extract underlying principles from the case study and adapt specific tactics to your market, team size, and business stage.
Underestimating the time and resources needed to replicate case study results.
Consequence: Setting unrealistic expectations leads to premature abandonment of sound improvement initiatives.
Correction: Plan for 2-3x the expected timeline. Most implementations take longer than projected due to unforeseen challenges.
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