How the BRRRR method works
BRRRR stands for buy, rehab, rent, refinance, repeat. You buy below value, renovate, rent the property, then refinance based on the new value to recover your cash.
The formula
Refinance loan = after repair value × lender’s loan-to-value
Worked example
Buy for $150,000 and spend $40,000 on rehab: $190,000 in. If the after repair value is $260,000 and the lender offers 75%, the new loan is $195,000, which returns all of your cash before closing and holding costs.
How to use this calculator
Enter the purchase price, the rehab cost, and your closing and holding costs. Then enter the after-repair value (ARV), the refinance loan-to-value, the refinance rate and the loan term, followed by the monthly rent and monthly expenses. The BRRRR calculator shows the all-in cost, the refinance loan, the cash left in the deal or pulled out beyond costs, the mortgage payment, the monthly cash flow, the cash-on-cash return and the equity after the refinance.
What the result means
Cash left in the deal is your total cash in minus the refinance loan. Zero or less means the refinance returned everything you put in. A positive number is cash that stays tied up in the property. Monthly cash flow matters just as much: a bigger loan returns more cash but leaves a bigger payment.
Getting all of your cash back does not make the property free. In the worked example you now owe $195,000, and the rent has to carry that loan.
More examples
If the appraisal comes in different
These use the same $190,000 in and a 75% loan-to-value.
| Appraised value | Refinance loan | Cash left in the deal |
|---|---|---|
| $240,000 | $180,000 | $10,000 |
| $260,000 | $195,000 | $0 ($5,000 back on top) |
| $280,000 | $210,000 | $0 ($20,000 back on top) |
At 70% instead of 75%, the $260,000 value supports a $182,000 loan and leaves $8,000 in the deal.
Cash flow after the refinance
Take the $195,000 loan at an example rate of 7% over 30 years. The payment is $1,297.34 a month. Suppose the rent is $2,800 and operating expenses follow the 50% rule, so $1,400. Cash flow is $1,400 − $1,297.34 = about $103 a month.
The debt service coverage ratio here is $16,800 of yearly net operating income ÷ $15,568 of yearly payments = 1.08. Many lenders prefer 1.20 to 1.25 or higher, so this deal might not qualify for the full loan. With the $182,000 loan, the payment drops to $1,210.85 and cash flow rises to about $189 a month.
What changes the result
- After repair value. Each $10,000 of appraised value adds $7,500 of loan at 75%.
- Loan-to-value. Five points of loan-to-value on a $260,000 property is $13,000 of cash.
- Rehab cost. Overruns add to your cash in without always adding to the value.
- Interest rate and rent. Together they decide whether the property pays for itself after the refinance.
Common mistakes
- Leaving closing and holding costs out of your cash in.
- Counting on the top of your ARV range. Use recent sales of similar renovated homes.
- Maximizing the cash out and ending up with thin or negative cash flow.
- Forgetting the seasoning period, which can delay the refinance while you keep paying holding costs.
Related calculators
Estimate the value first with the ARV calculator. Check the refinance against lender standards with the DSCR calculator, and measure the return on any cash left in with the cash on cash return calculator. Results are estimates. Your lender sets the actual loan terms.
Frequently asked questions
What loan-to-value do lenders offer?
Commonly 70% to 75% on a cash-out refinance of an investment property.
What is a seasoning period?
The time a lender requires you to own the property before refinancing at the new value.
What is the main risk?
An appraisal below your expected value leaves cash stuck in the deal.
Can I get all of my cash back in a BRRRR deal?
Only if the refinance loan is at least as large as your total cash in, including closing and holding costs. In the example, $190,000 in and a $195,000 loan gets there before those costs.
What does cash left in the deal mean?
It is the part of your investment the refinance did not return. Total cash in minus the refinance loan.
How do I estimate the after repair value?
From recent sales of similar renovated homes nearby. The lender’s appraisal, not your estimate, decides the loan amount.