Fix and Flip vs. BRRRR vs. Rental: Which Exit Strategy Is Right?

Finding a good deal is only half the equation. Choosing the right exit strategy determines how much money you actually make.

Strategy 1: Fix and Flip

Buy, renovate, sell for profit.

Key Metric: Return on Investment (ROI)

Flip ROI = Net Profit / Total Cash Invested × 100

Example: Buy at $180,000, spend $50,000 on rehab, sell at $300,000:

• Total invested: $230,000
• Sale proceeds (minus 8% costs): $276,000
• Net profit: $46,000
• ROI: 20% in 4-6 months

Best For

• Investors who want quick returns (3-9 months)
• Properties in strong seller's markets with low days on market
• Deals with clear value-add through renovation

Risks

• Rehab cost overruns eat profit fast
• Market can shift during renovation
• Short-term capital gains tax (ordinary income rates)

Strategy 2: BRRRR

Buy, Rehab, Rent, Refinance, Repeat.

Key Metric: Cash-on-Cash Return

Cash-on-Cash = Annual Cash Flow / Cash Left in Deal × 100

Example: ARV $300,000, refinance at 75% LTV ($225,000):

• Total invested: $230,000
• Cash back from refi: $225,000
• Cash left in deal: $5,000
• Monthly rent: $2,200, expenses: $1,600
• Annual cash flow: $7,200
• Cash-on-Cash: 144%

Best For

• Investors building a rental portfolio with limited capital
• Properties in strong rental markets
• Long-term wealth builders

Risks

• Appraisal may come in lower than expected
• Interest rate changes affect refinance terms
• Requires landlord management

Strategy 3: Buy and Hold Rental

Key Metric: Cap Rate

Cap Rate = Net Operating Income / Purchase Price × 100

Example: Purchase at $250,000, gross rent $2,000/month:

• Annual gross rent: $24,000
• Expenses: $9,600
• NOI: $14,400
• Cap Rate: 5.76%

Best For

• Passive income seekers
• Properties that don't need significant rehab
• Tax-advantaged investing (depreciation, 1031 exchanges)

How to Choose

• How fast do I need the money? Flip if you need cash now. BRRRR or rent if you can wait.
• What's the rent-to-value ratio? If monthly rent is 1% or more of ARV, rental strategies work well.
• How much rehab is needed? Heavy rehab favors flip or BRRRR.
• What's my tax situation? Rentals offer depreciation benefits. Flips are taxed as ordinary income.

The best investors analyze every deal through all three lenses and pick the strategy that maximizes returns for that specific property.