BRRRR Method Calculator

The Three Numbers That Decide a BRRRR Deal

First, equity created: ARV minus your total investment. Aim for 20% or more, because the refinance lender will only lend against a fraction of the new value. Second, cash recovered: the new loan pays off your original financing, and whatever remains flows back to you. Third, post-refinance cash flow: the property must still pay for itself after taking on the larger loan. A deal that returns all your cash but loses $200 a month has simply converted equity into a liability.

One note on the calculator’s arithmetic: it computes cash recovered as the new loan minus the purchase loan balance. It does not subtract refinance closing costs, and it counts only the down payment and rehab as cash invested. Add your purchase closing costs and holding costs to the rehab figure, and reduce the result by your expected refinance costs, to get a realistic answer.

Each Phase, With Numbers

The figures below come from one hypothetical deal that runs through the rest of this page: a dated three-bedroom house in a neighborhood where renovated homes sell for about $220,000 and rent for about $2,000 a month.

1. Buy

You buy for $110,000 with a short-term purchase loan of 80% ($88,000) and a $22,000 down payment. The buy is where BRRRR profit is made: you need a price far enough below ARV that purchase, rehab and carrying costs together land well under 75% of the finished value. A common back-of-envelope test is the maximum allowable offer: ARV x your target refinance LTV, minus rehab, minus closing and holding costs, minus refinance costs. Here, $220,000 x 75% = $165,000; less $45,000 rehab, $10,000 of closing and holding costs and $5,000 of refinance costs leaves $105,000. Paying $110,000 already means some cash will stay in the deal at 75% LTV.

2. Rehab

The rehab budget is $45,000 paid in cash: kitchen, bath, flooring, paint, a new water heater and some exterior work. Put a 10-15% contingency inside that figure, because old houses reveal problems once walls are open. Holding costs during the rehab and lease-up (interest on the purchase loan, property taxes, a vacant-dwelling insurance policy, utilities) plus purchase closing costs total $10,000 in this example. Every month of delay adds to that number. Use the rehab estimator to build the budget line by line.

Your total cash in is $22,000 + $45,000 + $10,000 = $77,000, and your all-in cost is $110,000 + $45,000 + $10,000 = $165,000. Against a $220,000 ARV, that is $55,000 of equity created, or 33% of the all-in cost.

3. Rent

The renovated house rents for $2,000 a month. Lenders refinancing a rental generally want to see a signed lease, and many will use the lower of actual rent or an appraiser’s market rent estimate when sizing the loan. Monthly operating costs, before the mortgage, are budgeted at $855: property tax $210, insurance $125, repairs 8% ($160), capital reserves 5% ($100), management 8% ($160) and vacancy 5% ($100). That leaves net operating income of $1,145 a month, or $13,740 a year. Screen tenants consistently and lawfully; the tenant screening checklist covers the process.

4. Refinance

After seasoning, an appraisal confirms the value and a new long-term loan replaces the purchase loan. The new loan pays off the $88,000 balance and about $5,000 of refinance closing costs, and the rest comes back to you. How much comes back, and what it does to cash flow, depends on the LTV you choose. That trade-off is the heart of the worked deal below.

5. Repeat

The recovered cash becomes the down payment and rehab budget for the next property. Repeat only works if each property is stable on its own: a portfolio of thin-margin rentals concentrates risk, because one vacancy or roof can force you to feed several properties at once. The scaling playbook covers reserves and pacing.

Refinance Seasoning and LTV Limits

Two lender rules determine how much cash a BRRRR refinance can return. Both vary by lender and loan program, and both change over time, so treat the ranges below as typical practice to confirm in writing, not as fixed rules.

• Seasoning. Many lenders require you to own the property for a period, commonly 6 to 12 months, before they will lend against the new appraised value. Refinance earlier and some lenders will cap the loan based on your purchase price plus documented rehab costs instead. Keep every invoice and receipt from the rehab for this reason.
• Maximum cash-out LTV. For investment property cash-out refinances, maximums around 70-75% of appraised value are common, with lower limits typical for 2-4 unit properties or lower credit scores. Rate-and-term refinances usually allow somewhat higher LTVs than cash-out.
• Debt service coverage. DSCR lenders (who qualify the loan on the property’s rent rather than your personal income) commonly look for rent to cover the payment, taxes, insurance and any HOA by around 1.0x to 1.25x. A larger loan lowers the ratio, so DSCR can cap your loan below the LTV maximum.
• Reserves and loan count. Lenders often require months of payments in reserve for each financed property, and some limit how many financed properties one borrower can hold.

The guides on refinancing rental properties and traditional vs portfolio vs hard money loans explain the main loan types.

Worked Deal: Money Left In vs All Cash Out

Same house, same $77,000 of cash in, same $1,145 monthly NOI. Two refinance outcomes, both on a 30-year fixed loan at 7%:

Outcome A leaves $16,000 in the property and earns about $1,445 a year on it, a 9.0% cash-on-cash return, with a modest cushion. Outcome B is the “infinite return” that BRRRR marketing celebrates: you have pulled out $2,500 more than you put in. But the property now breaks even before any surprise, with every dollar of reserves already spent in the NOI budget. One bad turnover, and you are paying the mortgage from your own pocket.

Neither outcome is automatically right. If you have a strong next deal and healthy reserves, B frees $18,500 more capital. If this property needs to stand on its own, A is the safer structure. Many experienced investors decide the LTV after seeing the appraisal, choosing the largest loan that keeps DSCR comfortably above 1.0 at a rate a point or two above today’s quote.

The Risks: Appraisal Gaps, Rate Shocks and Delays

Appraisal gaps

If the appraisal comes in at $200,000 instead of $220,000, a 75% LTV loan is $150,000. After paying off $88,000 and $5,000 of costs, $57,000 comes back and $20,000 stays in. Appraisers rely on closed sales of similar renovated homes nearby; if there are few, or your finishes exceed the neighborhood, the value may not follow your spending. Underwrite ARV from sold comps within a short distance and a recent window, and make sure the deal still works at a value 10% below your estimate.

Rate shocks

You commit to the purchase months before you lock the refinance rate. If rates rise from 7% to 8.5% in that window, outcome A’s payment rises from $1,024.57 to $1,184.13 and cash flow turns to about -$39 a month. Outcome B’s payment becomes $1,326.38, about -$181 a month. To get back to positive cash flow, you would have to take a smaller loan and leave more cash in. Always run the calculator at a higher rate than today’s.

Rehab overruns and delays

A $9,000 overrun and three extra months of holding costs move cash in from $77,000 to roughly $90,000 without raising the ARV at all. Short-term purchase loans often carry higher rates and short terms, so a delayed refinance can mean an extension fee or a forced sale. Keep enough cash to carry the property for several months beyond your plan.

When BRRRR Stops Working

• The discount disappears. When distressed properties sell close to renovated values, there is no spread to capture. If you cannot buy at roughly 75% of ARV minus rehab and costs, the refinance will leave a lot of cash in.
• Rates rise faster than rents. A larger loan at a higher rate needs higher rent to cover it. When local rents cannot support the payment at a meaningful LTV, the strategy turns into buying, renovating and holding with most of your cash still invested.
• Lenders tighten. Lower LTV caps, longer seasoning or stricter DSCR minimums all shrink cash-out. Strategies that depend on one lender’s current program are fragile.
• Your portfolio gets too levered. Each fully refinanced property has little equity cushion. A market decline or a rate reset can leave several properties underwater at once, with no way to refinance or sell at break-even.
• Your time runs out. BRRRR is a part-time job: sourcing, managing contractors, leasing and refinancing. Calculate what the deal earns per hour of your time, not only per dollar.

At some point many BRRRR investors switch from recycling cash to deciding what to do with the equity they built: keep, refinance again, sell, or exchange into a larger property. The keep-or-sell calculator compares those exits after tax, including depreciation recapture on properties you have held and depreciated for years.

Common BRRRR Mistakes

• Using list prices or the most expensive renovated sale as the ARV.
• Leaving closing costs, holding costs and refinance costs out of the cash-recovered math.
• Over-improving for the neighborhood, so the appraisal does not reward the spending.
• Assuming today’s refinance rate and LTV will still be available six to twelve months from now.
• Budgeting operating expenses with no vacancy, repairs or capital reserves, which hides a negative cash flow.
• Starting the next deal before the previous refinance has closed.

The cash you take out of a refinance is borrowed money, not income, so it is not taxed when you receive it (IRS Publication 334: “Money borrowed through a bona fide loan is not income”). How the interest is treated depends on what you spend the proceeds on, as the refinance calculator page explains. This is general information, not tax or lending advice. Related reading: the BRRRR method explained, BRRRR calculator guide, ROI calculator and the due diligence checklist.