Why It Matters
BRRRR deal criteria tell you whether a property can survive all five stages of the BRRRR cycle: Buy, Rehab, Rent, Refinance, Repeat. Without defined criteria, investors overpay at acquisition, underestimate rehab costs, or get stuck after refinancing with no capital to repeat. The criteria ensure the math works before you commit.
At a Glance
- Sets minimum thresholds for ARV, purchase price, rehab budget, rent, and cash-out
- Defined before searching — not adjusted to fit a deal you already like
- Protects capital by filtering out deals that cannot support a cash-out refinance
- Anchors to ARV: purchase price + rehab cost should not exceed 70–75% of ARV
- Rent must cover PITI plus a margin after the refinance loan is in place
- Applies at acquisition — changing criteria mid-deal signals emotional decision-making
How It Works
The BRRRR strategy only works if the refinance pays back most or all of the original capital. That means the property must appraise high enough after rehab for the lender to issue a loan large enough to return your investment. Your deal criteria build backward from that outcome.
The 70–75% Rule Most BRRRR investors start with the combined rule: purchase price plus rehab scope costs must total no more than 70–75% of the after-repair value (ARV). If a property will be worth $200,000 fully remodeled, your all-in cost must stay at or below $140,000–$150,000. This gap gives the lender room to loan at 75–80% LTV while still returning your capital.
Rent-to-PITI Coverage After the refinance, the property must generate enough monthly rent to cover principal, interest, taxes, and insurance — and still leave a positive margin. Most investors require at least 1.0–1.2x rent-to-PITI coverage. If the refinanced mortgage raises the payment above what the market rent supports, the deal fails the income test even if the numbers looked fine pre-rehab.
The BRRRR Timeline Constraint Most lenders impose a seasoning period — typically six months — before they will refinance based on appraised value rather than purchase price. Your criteria must account for carrying costs during that window: mortgage (or hard money interest), insurance, taxes, and utilities. Deals that barely pass the 70% rule often fail when six months of carrying costs are added.
Equity Floor After refinancing, you should retain meaningful equity position. Most investors set a minimum of 20–25% equity remaining after the refinance loan. This protects against appraisal risk (the property appraises lower than expected) and gives a buffer if the market softens.
Cash-on-Cash After Refi Experienced BRRRR investors also require a minimum cash-on-cash return after refinancing, typically 8–12% on any capital not recovered. If the refinance returns 90% of your capital, the remaining 10% must still earn a competitive return. This prevents accepting a deal that looks like a "good BRRRR" but actually ties up capital at poor returns.
Setting Criteria Before You Search The only time criteria work is when you set them before seeing a specific deal. Once you are emotionally invested in a property, the human tendency is to loosen standards to make the deal fit. Committed, written criteria prevent this. Keiko, an investor in Columbus, keeps a one-page deal criteria sheet in her underwriting folder. Every property gets measured against the same thresholds — if it misses on any line, it goes back without further analysis.
Real-World Example
Keiko targets distressed single-family homes in Columbus, Ohio. Her written BRRRR deal criteria require: purchase price plus rehab at or below 72% of ARV, post-refinance rent covering PITI at 1.15x minimum, minimum $35,000 equity retained after refinancing, and at least 9% cash-on-cash on any unreturned capital.
She finds a three-bedroom with water damage listed at $68,000. Comparable sales suggest an ARV of $165,000 after full renovation. Her contractor's rehab scope estimate comes in at $42,000. All-in cost: $110,000 — 66.7% of ARV. The deal passes the 70% test with room to spare.
Post-rehab rent comps show $1,350/month. A 75% LTV refinance on $165,000 would yield a $123,750 loan — returning all of her $110,000 investment and putting $13,750 back in her pocket. The new loan payment at 7.5% over 30 years would be approximately $865/month. With taxes and insurance adding $300, her PITI is $1,165 — and rent of $1,350 covers it at 1.16x. Every line of her criteria passes. She proceeds.
Pros & Cons
- Eliminates emotional buying by anchoring decisions to pre-set numbers
- Speeds up deal evaluation — a deal that fails criteria is rejected in minutes, not days
- Protects the refinance exit by ensuring the ARV gap is sufficient from day one
- Forces conservative assumptions on rehab costs and ARV, which reduces risk of capital being stuck
- Scales well: the same criteria sheet can evaluate hundreds of deals systematically
- Rigid criteria may cause you to pass on deals that would have worked with creative structuring
- ARV estimates are inherently uncertain — criteria built on an inflated ARV give false confidence
- Criteria set in one market may not transfer to markets with different rent-to-price ratios
- Does not account for qualitative factors: neighborhood trajectory, landlord-tenant law, insurance availability
Watch Out
Lender guidelines change. A refinance that worked at 75% LTV last year may only qualify at 70% LTV today due to market conditions or borrower profile changes. Build your criteria around conservative LTV assumptions and re-test them whenever you close a new lender relationship.
Beware of adjusting criteria retroactively. If a deal fails your 72% all-in rule but you really want the property, the temptation is to revise the rule to 78% — just this once. That is the beginning of undisciplined underwriting. Track every deal you pass on and revisit them a year later to see whether the discipline paid off.
Also confirm your rehab scope estimate is complete before running the numbers. A preliminary estimate that misses structural repairs or code compliance items can make a borderline deal look like a clear winner — only for the real rehab budget to blow past your criteria mid-project.
The Takeaway
BRRRR deal criteria are your investment policy statement at the property level. They define what you will and will not buy before the search begins, and they hold you accountable when a deal looks attractive but the numbers say no. The investors who build wealth through BRRRR are not the ones who find the most deals — they are the ones who stay disciplined enough to pass on the ones that don't qualify.