Your friend bought a run-down duplex for $300,000, spent $50,000 on renovations, got it appraised at $425,000, refinanced to pull out their original investment, and now owns a cash-flowing property with almost none of their own money in it. Then they did it again. That's BRRRR—and here's how it works in the Canadian market.
What Is BRRRR?
BRRRR is a real estate investment strategy that allows you to:
- Build a portfolio faster than traditional buy-and-hold
- Recycle your initial capital into multiple properties
- Add value through strategic renovations
- Create equity through "forced appreciation"
The Five Steps
B - Buy (Below Market Value)
Find properties selling under market value:
- Distressed sellers
- Estate sales
- Divorce situations
- Properties needing work
- Tired landlords
Key: The profit is made when you buy, not when you sell.
R - Rehab (Strategic Renovations)
Add value through improvements:
- Focus on rent-increasing upgrades
- Kitchen and bathroom updates
- Flooring and paint
- Add bedrooms if possible
- Address deferred maintenance
Key: Don't over-improve. Match renovations to the neighborhood.
R - Rent (At Market Rates)
Once renovated, place quality tenants:
- Screen thoroughly
- Set appropriate market rents
- Document property condition
- Create systems for management
Key: Strong tenants protect your investment.
R - Refinance (Pull Out Your Capital)
Once stabilized, refinance to:
- Get new appraisal reflecting improvements
- Pull out up to 80% of new value
- Ideally recover most or all of your initial investment
- Lock in favorable terms
R - Repeat
Use recovered capital to:
- Buy the next property
- Start the cycle again
- Scale your portfolio
Learn BRRRR Financing Options
Talk to our investment specialists about financing strategies for BRRRR investments.
BRRRR Math Example
Purchase:
- Asking price: $350,000
- Your offer (distressed sale): $300,000
- Rehab budget: $50,000
- Total investment: $350,000
After Rehab:
- New appraised value: $425,000
- Refinance at 80% LTV: $340,000
- Pay off original costs: $350,000
- Cash left in deal: $10,000
You now own a $425,000 asset with only $10,000 invested, and your $340,000 from refinancing (minus what you spent) goes into the next deal.
Financing BRRRR in Canada
Initial Purchase Options:
Cash:
- Fastest closing
- Strongest offers
- Ties up capital
Private/Hard Money:
- Short-term bridge financing
- Higher rates (10-15%)
- Designed for renovation properties
- 6-12 month terms
HELOC:
- Use equity from existing properties
- Lower rates than private
- Flexible draws for renovations
Conventional (Difficult):
- Banks don't love renovation properties
- Slow closing hurts distressed deals
- Limited options for rough properties
Refinance Options:
Conventional Mortgage:
- Best rates
- 20% down (80% LTV)
- Rental income helps qualify
- Standard amortization
B-Lender:
- More flexible underwriting
- Higher rates
- Good for newer investors
Key Success Factors
1. Accurate Renovation Budgets
Common mistake: Underestimating costs
- Get contractor quotes before buying
- Add 15-20% contingency
- Account for carrying costs during renovation
2. Correct ARV (After Repair Value) Estimate
Common mistake: Overestimating finished value
- Use conservative comparable sales
- Consider neighborhood ceiling
- Factor in current market conditions
3. Strong Contractor Relationships
- Reliable, fairly-priced work
- Timelines that hold
- Quality that appraises well
4. Understanding Holding Costs
During renovation, you pay:
- Interest on purchase financing
- Property taxes
- Insurance
- Utilities
- No rental income
Budget for 3-6 months minimum.
5. Refinance Timeline
Lenders often require:
- 6-12 months ownership before refinancing
- Proof of rental income
- Updated appraisal
- Standard mortgage qualification
Canadian BRRRR Considerations
Slower Market Reality
Unlike hot US markets, Canadian deals may require:
- More holding time
- Smaller profit margins
- Patience for refinancing
Rental Market Strength
BRRRR works best where:
- Rents support cash flow after refinance
- Vacancy rates are low
- Rental demand is strong
Seasonal Constraints
Canadian renovations face:
- Weather delays
- Shorter construction seasons in some regions
- Heating costs during winter renovations
When BRRRR Doesn't Work
Avoid BRRRR If:
- Property is already at market value
- Renovation costs exceed value added
- Rental income won't support refinanced mortgage
- You can't handle project management
- Local market is declining
FAQ
Q: How much capital do I need to start?
A: Depends on market. $75,000-$150,000 is often needed for first deal (all-in costs before refinance).
Q: What if I can't recover all my capital on refinance?
A: This is common. Even recovering 80% allows scaling faster than traditional investing.
Q: How long should renovations take?
A: Aim for 2-4 months. Longer holds eat into returns.
Q: Can I do BRRRR on my first investment?
A: Possible, but challenging. Consider simpler buy-and-hold first.
Q: What happens if the appraisal comes in low?
A: You leave more capital in the deal. Get pre-renovation appraisals to set expectations.
Q: Is BRRRR passive?
A: No. It requires active involvement in finding deals, managing renovations, and executing refinances.
What's Next
BRRRR is powerful but not passive or easy. It requires capital, skills, and network. Talk to our investment team about financing options for your BRRRR strategy.
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