The BRRRR strategy—Buy, Rehab, Rent, Refinance, Repeat—is a powerful tool for real estate investors looking to build long-term wealth with limited capital. But what if you don’t have enough cash on hand to buy and renovate a property yourself? Enter: private capital.
Structuring a BRRRR deal using private money can unlock incredible opportunities—but only if the deal is built the right way from the start. In this guide, we’ll break down how to successfully structure a BRRRR deal with private capital in a way that protects your investor, maximizes returns, and sets you up for scalable growth.
Step 1: Find a Property That Fits the BRRRR Model
Not every deal works for BRRRR. You need:
• Discounted purchase price
• High ARV (After Repair Value)
• Room for forced appreciation through rehab
• Strong rental demand
• Favorable financing terms
Target markets where values are rising, rent demand is strong, and rehab costs are predictable (like the Midwest or Southeast).
Pro Tip: Use the 70% rule to reverse-engineer your max purchase price:
(ARV x 70%) – Rehab Cost = Max Offer
Step 2: Secure Private Capital for Purchase + Rehab
Private lenders (friends, family, or networked investors) can fund the purchase price, the rehab budget, and sometimes even holding costs or interest reserves.
Structure the deal clearly with a:
• Promissory note – Defines repayment terms
• Mortgage or deed of trust – Secures their money to the property
• Draw schedule – Controls release of rehab funds
Tip: Always secure their capital in 1st lien position unless co-lending.
Step 3: Close the Deal & Rehab Efficiently
With funds secured, close on the property and start the rehab. Time is money when using private capital, so stick to a defined timeline. Avoid over-improving; focus on:
• Kitchen & bath updates
• Curb appeal
• Safety & code issues
• Durable finishes for rentals
Use a scope of work and stay on budget. Keep your lender updated with progress pics and cost breakdowns.
Step 4: Rent It Out Quickly
Once the property is rehabbed, screen and place tenants fast. Your lender wants to see momentum and income.
Tips:
• Pre-market during final rehab phase
• Use strong lease agreements
• Require renter’s insurance
• Collect security deposit and first month’s rent upfront
Now your property is generating income and building value.
Step 5: Refinance to Pay Back Your Lender
The refinance is the exit strategy for your private lender. Work with a bank or DSCR lender who understands BRRRR timelines.
At refinance:
• The property is re-appraised based on ARV
• The lender gives you a long-term loan (usually 70-75% of the new appraised value)
• You use those funds to pay off your private lender in full
If structured correctly, you own the property with little or no money left in the deal, have stable long-term financing, and created equity and cash flow.
Step 6: Repeat… with the Same Lender!
Delivering a clean, timely payback builds trust. Most private lenders will be excited to reinvest once they see results.
To scale, create a track record sheet showing past deals and offer options like:
• Fixed interest
• Equity share (profit split or cash flow share)
• Preferred return + equity kicker
You don’t need hundreds of lenders—just a few who trust you.
Legal & Ethical Considerations
Always disclose risks and structure deals in writing. Use licensed professionals to draft your documents. Never co-mingle personal and investor funds. Be upfront: BRRRR involves risk, delays, and market variables.
Example Breakdown
Let’s say:
Purchase price: $80,000
Rehab budget: $30,000
All-in: $110,000
ARV: $160,000
Private lender funds $110,000
After rehab:
Property appraises at $160,000
Bank refinances at 75% LTV = $120,000
You pay off the $110,000 private loan
You keep the property + pocket $10K (minus fees)
Tenant pays $1,500/month in rent
You now own a cash-flowing asset… and your lender’s ready for your next deal.
Final Thoughts
The BRRRR strategy works. But structuring it with private capital is what makes it scalable. Treat your private lenders like partners. Be transparent, be consistent, and build systems that keep your deals moving. When you do it right, everybody wins.
