The BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) is the most powerful strategy for building a rental property portfolio with limited cash. By using a HELOC on your primary residence to fund deals, you can recycle your capital infinitely. Here's the complete playbook with real numbers, lender requirements, and how to avoid the overleveraging trap.
What Is BRRRR and Why Use a HELOC?
BRRRR stands for:
- Buy: Purchase distressed property below market value (cash or hard money)
- Rehab: Renovate to increase value and make rent-ready
- Rent: Place tenant and stabilize cash flow
- Refinance: Pull out invested capital with cash-out refinance at new appraised value
- Repeat: Use recovered capital to buy next property
Use HELOC to make cash offer on distressed property. Example: $180K purchase price, draw $180K from HELOC.
Draw additional $40K from HELOC for renovations. Total invested: $220K. Property now worth $300K after rehab.
Place tenant at $2,400/month. Get 6 months of payment history to qualify for refinance. Generate $14,400 in rent.
Refinance at 75% LTV on $300K appraised value = $225K loan. Use $225K to pay off HELOC ($220K). Recover 100% of capital.
HELOC is paid off and available again. Use it to buy next property. Scale infinitely with same $220K.
Why HELOC Is the Best Funding Source
| Funding Source | Down Payment | Speed | Interest Rate | Flexibility |
|---|---|---|---|---|
| HELOC | 0% (it's a line of credit) | 1-3 days (once approved) | 8.5-10.5% | Revolving, reusable |
| Cash Savings | 100% upfront | Immediate | 0% (but opportunity cost) | Limited, depletes reserves |
| Hard Money | 10-20% | 7-14 days | 10-14% | Short-term only (6-12 mo) |
| Investor Loan | 20-25% | 30-45 days | 7-8% | Long approval, strict DTI |
| Private Money | 0-20% | 1-7 days | 8-12% | Requires relationships |
HELOC advantage: You only pay interest on what you use, and once you refinance and pay it back, it's available again. It's like having an infinite down payment fund.
Step-by-Step: Complete BRRRR Deal with Numbers
Starting Position:
- Primary residence: $500K value, $300K mortgage, $200K equity
- HELOC approved: $160K (80% LTV = $400K minus $300K mortgage, minus 10% buffer)
- Cash reserves: $20K emergency fund (keep untouched)
Deal: Distressed Single-Family Home
Step 1: Buy (Month 1)
- Purchase price: $180,000 (ARV: $300K, needs $40K rehab)
- Closing costs: $5,000 (2.8%)
- Total acquisition: $185,000
- HELOC draw: $185,000 at 9.5% interest
- Monthly HELOC payment (interest-only): $1,465/month
Step 2: Rehab (Month 2-4)
- Renovation scope: Kitchen ($18K), bathrooms ($10K), flooring ($8K), paint ($4K)
- Total rehab cost: $40,000
- Additional HELOC draw: $40,000
- Total HELOC balance: $225,000
- Monthly HELOC payment: $1,781/month (interest-only)
- Timeline: 90 days to complete rehab
Step 3: Rent (Month 5-10)
- List property: $2,400/month (market rate after renovations)
- Tenant screening: 2 weeks to find qualified tenant
- Move-in: First month + security deposit ($4,800 collected)
- Monthly rent: $2,400
- Monthly expenses: $600 (taxes, insurance, maintenance reserve)
- Net operating income: $1,800/month
- HELOC payment: -$1,781/month
- Net cash flow during rental period: +$19/month (breakeven)
- Seasoning requirement: Wait 6 months of rent history for refinance
Step 4: Refinance (Month 11-12)
- New appraisal: $300,000 ARV (After Repair Value)
- Cash-out refinance: 75% LTV = $225,000 loan
- Interest rate: 7.25% (investor rate, 30-year fixed)
- Refinance costs: $6,000 (2% of loan, rolled into loan)
- Final loan amount: $231,000
- Payoff HELOC: $225,000 - $231,000 = -$6,000 (you net $0 but recover all capital)
- New monthly P&I: $1,577
- Monthly expenses: $600
- Total monthly cost: $2,177
- Monthly rent: $2,400
- Monthly cash flow: +$223/month ($2,676/year)
Step 5: Repeat
- HELOC balance: $0 (paid off via refinance)
- HELOC available: $160K (ready for next deal)
- Property equity: $69K ($300K value - $231K loan)
- Cash invested: $0 (recovered 100%)
- Annual return: Infinite (no money left in deal)
Total interest paid during cycle: $18,700. Recovered via refinance + rental income.
→ Use the HELOC Calculator to model interest costs and payoff strategies for your specific deal.
Finding Lenders Who Allow HELOCs on Rental Properties
Not all lenders allow HELOCs to be used for investment property purchases. Here's how to find the right one:
HELOC-Friendly Lenders for Real Estate Investors
1. Local Credit Unions
- Best for: Flexible underwriting, relationship-based lending
- Requirements: Membership (usually $5-25 to join), primary residence as collateral
- Rates: Prime + 0.5-2% (8.5-10% in 2025)
- Max LTV: 80-90% (depends on credit and relationship)
- Approval time: 7-21 days
- Examples: Navy Federal, PenFed, Alliant, local community credit unions
2. Portfolio Lenders (Regional Banks)
- Best for: Experienced investors with multiple properties
- Requirements: 680+ credit, proof of real estate experience (2+ properties)
- Rates: Prime + 1-2.5% (9-10.5%)
- Max LTV: 75-80%
- Approval time: 14-30 days
- Examples: TD Bank, Fifth Third, Frost Bank, local regional banks
3. Online HELOC Lenders
- Best for: Fast approval, digital process
- Requirements: 700+ credit, low DTI (<43%)
- Rates: Prime + 1-3% (9-11%)
- Max LTV: 80-85%
- Approval time: 3-10 days
- Examples: Figure, Spring EQ, Loan Depot
Questions to Ask Lenders
- "Can I use the HELOC to purchase investment property?" (Many will say no-keep calling until you find yes)
- "Do you allow HELOCs on properties that already have a first mortgage?" (You want yes)
- "What's the draw period and repayment period?" (10 years draw / 20 years repayment is standard)
- "Are there prepayment penalties?" (You want no penalties since you'll pay it off fast)
- "Do you report to credit bureaus?" (Some don't report until you're delinquent, helping your DTI)
- "What's the minimum draw requirement?" (Some require $10K-25K minimum initial draw)
HELOC Qualification Requirements
- Credit score: 680+ (720+ for best rates)
- Debt-to-income: Below 43% (including HELOC payment)
- Home equity: Minimum 15-20% (most allow up to 80-90% CLTV)
- Income documentation: W-2s, tax returns (2 years), profit/loss if self-employed
- Appraisal: Desktop or drive-by appraisal ($150-400)
- Occupancy: Must be primary residence or second home (no HELOCs on investment properties as collateral)
Critical Restriction: You Cannot Use a HELOC on a Rental Property
The HELOC must be secured by your primary residence or second home. You cannot get a HELOC on an existing rental property. This is why BRRRR works: You use equity from your primary home to buy rentals, then refinance the rental with a regular mortgage to pay off the HELOC. Your primary residence HELOC is freed up for the next deal.
Risks and How to Avoid Overleveraging
The BRRRR strategy is powerful but risky if you overextend. Here's how to avoid common pitfalls:
Risk 1: Deal Doesn't Appraise High Enough
Scenario: You invest $225K (purchase + rehab), but property appraises for $270K instead of $300K.
- 75% LTV on $270K = $202,500 refinance loan
- You have $225K HELOC balance to pay off
- Shortfall: $22,500 out of pocket or carry HELOC balance
Prevention:
- Conservative ARV estimates: Get 3 comps before buying, use lowest
- Build in 10% buffer: If ARV is $300K, plan around $270K refinance
- Get pre-appraisal consultation: Some investors pay $150 for appraiser to preview property and estimate value before buying
Risk 2: Can't Refinance Due to Low DSCR
Scenario: Property cash flows well, but lender requires 1.25 DSCR and your numbers don't qualify.
- Monthly rent: $2,400
- Required DSCR: 1.25
- Max PITI payment: $1,920 ($2,400 / 1.25)
- Actual PITI at 75% LTV: $2,177
- Result: Denied refinance
Prevention:
- Run DSCR calculations before buying: Rent / (P&I + taxes + insurance) must be ≥ 1.25
- Choose higher-rent properties: $2,800/month rent would qualify in above scenario
- Reduce loan amount: Put more cash in to reduce LTV to 70% or 65%
- Find DSCR-lenient lenders: Some accept 1.15 or 1.10 DSCR
Risk 3: Rental Market Tanks or Extended Vacancy
Scenario: You carry $225K HELOC at $1,781/month for 8 months but can't find tenant.
- HELOC interest cost: $14,248 (8 months × $1,781)
- Property expenses: $4,800 (8 months × $600)
- Total carrying cost: $19,048
Prevention:
- Buy in high-demand rental markets: <5% vacancy rate, check Zillow rental data
- Price competitively: List at market rate or 5% below to rent fast
- Offer incentives: First month free, pay utilities, flexible lease terms
- Reserve fund: Keep $10K-15K cash reserves separate from HELOC for carrying costs
- Worst case: Reduce rent to fill quickly, break even is better than vacancy
Risk 4: Overleveraging Multiple Deals Simultaneously
Scenario: You have 3 BRRRR deals active, totaling $450K HELOC balance at $3,562/month interest.
- If one deal falls through or refinance delays, you're carrying massive interest
- If housing market crashes, you're underwater on multiple properties
- If you lose your job, you can't afford HELOC payments
Prevention:
- One deal at a time: Complete full BRRRR cycle before starting next
- Max 50% HELOC utilization: If you have $200K HELOC, never exceed $100K drawn
- Stress test: Can you afford HELOC payments + property expenses for 6 months with zero rental income?
- Income stability: Never BRRRR if your job is unstable or commission-based
- Market timing: Avoid BRRRR in peak markets (risk of value decline) or recession fears
The 50/30/20 BRRRR Rule
- 50% max HELOC usage: If you have $200K line, max $100K in active deals
- 30% equity buffer: After refinance, maintain at least 30% equity in rental property (don't refinance to 80% LTV if avoidable)
- 20% cash reserves: Keep 20% of total invested capital in cash reserves ($45K cash if you have $225K in active deals)
→ Use the Long-Term Rental ROI Calculator to model cash flow before committing to a BRRRR deal.
Frequently Asked Questions
Can I get a HELOC on my rental property to buy more rentals?
No. HELOCs are only available on primary residences and second homes, not investment properties. This is a Fannie Mae/Freddie Mac rule that nearly all lenders follow. Your only option for tapping equity in a rental property is a cash-out refinance (max 75% LTV) or a blanket loan (portfolio financing across multiple properties). The BRRRR strategy works specifically because you use your primary residence HELOC to fund purchases, then refinance the rental with a traditional mortgage to free up your HELOC again. Alternative: If you have significant equity in rental properties, consider a portfolio line of credit from a commercial lender, but these require strong financials and multiple properties (typically 5+ units).
How long do I have to wait before I can refinance after buying a property?
Most lenders require a "seasoning period" of 6-12 months before allowing a cash-out refinance on an investment property. Requirements: (1) 6 months of rent payment history showing stable tenant, (2) 6-12 months since original purchase (some lenders waive if you did substantial rehab), (3) new appraisal showing increased value, and (4) DSCR of 1.15-1.25 (rent must cover 115-125% of mortgage payment). Exception: Some portfolio lenders and DSCR loan specialists allow immediate refinance if you can prove value-add rehab increased property value significantly. You'll pay slightly higher rates (7.5-8.5% vs 7-7.5%) but can skip seasoning. Shop multiple lenders as policies vary widely. Pro tip: Close on rental property in January, refinance in June (6 months) to minimize HELOC interest carrying costs.
What if I can't pay off my entire HELOC with the refinance proceeds?
You have four options if you're short on the refinance: (1) Bring cash to closing: If you're $15K short, pay it out of pocket to free up your HELOC for the next deal. (2) Reduce cash-out amount: Instead of 75% LTV, refinance at 70% or 65% LTV to lower your loan and keep property cash flow positive. (3) Carry the HELOC balance: Pay down the shortfall over 6-12 months using rental income from the property or other sources. This delays your next deal but avoids coming out of pocket. (4) Sell the property: If the deal doesn't work, list it retail for full market value and recoup your investment. In strong markets, you might profit even after costs. Prevention is key: Always underwrite assuming 70% LTV refinance, not 75%, to build in a buffer. If you get 75%, it's a bonus.
Should I use a HELOC or hard money loan for BRRRR?
Use HELOC if you have sufficient equity in your primary residence (cheaper, more flexible). Use hard money if: (1) you don't have a primary residence with equity, (2) you need higher leverage (hard money often funds 90-100% of purchase + rehab), or (3) your HELOC is tapped out on another deal. Cost comparison on $225K deal: HELOC at 9.5% for 10 months = $17,800 interest. Hard money at 12% + 2 points for 10 months = $22,500 interest + $4,500 points = $27,000 total. Hard money costs $9,200 more. But hard money advantage: They fund based on ARV, not your personal credit/income. If you have multiple deals running, hard money lets you scale faster. Hybrid approach: Use HELOC for first 1-2 deals to prove your system, then add hard money to fund 3-4 deals simultaneously once you're experienced.
How many BRRRR deals can I do per year?
Limited by: (1) HELOC capacity: If you have $200K HELOC and each deal uses $225K, you can do one deal at a time. With a $400K HELOC, you can run 1-2 deals simultaneously. (2) Refinance limits: Most lenders cap you at 4 conventional mortgages, then you need portfolio/commercial loans (higher rates, stricter terms). (3) Time per deal: 12 months average (1 month buy + 3 months rehab + 6 months rent seasoning + 2 months refinance). At this pace, you can complete 1 deal per year. Accelerate by: (1) Overlapping deals: Start deal #2 while deal #1 is in rent seasoning phase. (2) Shorter seasoning lenders: Find lenders who accept 3-month seasoning instead of 6. (3) Larger HELOC: Refinance your primary residence to increase HELOC limit. Realistic pace for first-time BRRRR investors: 1 deal first year (learning), 2-3 deals second year (experienced), 4-6 deals third year+ (with commercial financing and larger capital base).