How to use this calculator
- Buy & rehab: enter the purchase price, closing costs, rehab budget and how many months until you can refinance (rehab, lease-up and any lender seasoning period), plus monthly holding costs while the property is vacant.
- Initial financing: choose cash or a hard money loan. For hard money, enter the loan-to-cost, rate and points; interest is modeled as interest-only until the refinance.
- Refinance: enter a conservative after-repair value (ARV), the lender’s cash-out LTV, rate, term and closing costs.
- Rent & expenses: enter realistic rent and reserves for vacancy, maintenance, management and capital expenditures.
- Read the results: cash left in the deal, cash flow after the refinance and your cash-on-cash return.
What is the BRRRR method?
BRRRR is a strategy for building a rental portfolio while recycling the same pool of cash:
- Buy a distressed or under-valued property below what it will be worth after renovation.
- Rehab it to raise its value and rent.
- Rent it to a qualified tenant — lenders want to see a lease or market rent.
- Refinance into a long-term mortgage based on the new, higher appraised value, paying off the short-term loan and returning some or all of your cash.
- Repeat with the recovered cash.
The whole strategy hinges on the gap between your all-in cost and the after-repair value. The bigger that gap, the more cash the refinance returns.
Worked example
An investor buys a house for $130,000 with $3,500 in closing costs and a $35,000 rehab, using a hard money loan for 85% of price + rehab ($140,250) at 11% with 2 points. It takes 6 months to renovate, rent and refinance, with $550 a month of holding costs.
- Hard money interest: $7,714; points $2,805; holding costs $3,300.
- All-in cost: $182,319. Cash the investor put in before the refinance: $42,069.
- The house appraises at $240,000. A 75% cash-out refinance gives a $180,000 loan; after repaying the hard money and $5,400 of closing costs, $34,350 comes back.
- Cash left in the deal: $7,719 — about 82% of the investor’s cash recovered.
- At $2,200 rent, cash flow after the new $1,227.92 payment is about $58 a month, a cash-on-cash return of about 9% on the cash left in — plus $60,000 of equity.
The 70% rule
A popular screening rule for flips and BRRRR deals: pay no more than 70% of the after-repair value minus the rehab cost. For the example, 70% × $240,000 − $35,000 = $133,000, so the $130,000 price passes. The 30% cushion covers closing, holding and financing costs and protects against surprises. In expensive markets, investors sometimes stretch to 75%–80%, but then less cash comes back at the refinance.
The refinance: LTV limits and seasoning
- LTV caps: conventional cash-out refinances on investment properties are typically limited to about 75% of value for one-unit homes and 70% for 2–4 units. DSCR lenders commonly allow 70%–75%.
- Seasoning: many lenders won’t use the new appraised value until you’ve owned the property for a set period — often 6–12 months. Until then, they may lend only against your purchase price. Confirm this before you buy.
- Appraisal risk: if the appraisal comes in below your ARV estimate, less cash comes back. Use comparable sales of renovated homes, and run a lower-ARV scenario.
- Rate risk: your refinance rate isn’t known when you buy. Test a rate 0.5–1 point higher to be safe.
What can go wrong
- Rehab overruns and delays — every extra month adds hard money interest and holding costs. Budget a 10%–20% contingency.
- A low appraisal can leave far more cash in the deal than planned.
- Negative cash flow after the refinance — pulling out all your cash means a larger loan and payment. A deal that recovers your cash but loses money monthly isn’t sustainable; check with the rental property calculator.
- Over-leverage across several properties — keep reserves for vacancies and repairs on every property.
How the calculator works
Hard money loan = LTC × (price + rehab); interest = loan × rate ÷ 12 × months; points = loan × points %
All-in cost = price + closing + rehab + holding + hard money interest + points
Cash in before refi = all-in cost − hard money loan
Refi loan = ARV × LTV; cash back = refi loan − hard money payoff − refi closing costs
Cash left in deal = cash in before refi − cash back
Cash-on-cash = annual cash flow after refi ÷ cash left in deal
Cash flow after the refinance is rent minus vacancy, operating expenses and the new principal-and-interest payment. The model assumes the hard money loan is interest-only and fully drawn at purchase; real rehab loans often fund repairs in draws, which lowers interest.
Frequently asked questions
What does BRRRR stand for?
Buy, Rehab, Rent, Refinance, Repeat. You buy a property below its potential value, renovate it, rent it out, then refinance based on the higher after-repair value to pull out some or all of your cash — which you reuse for the next deal.
What is a good BRRRR deal?
Investors usually aim to recover most or all of their cash at the refinance while still cash flowing afterward. A deal that leaves little cash in and produces positive monthly cash flow can generate very high, even “infinite”, cash-on-cash returns. A deal that recovers your cash but loses money every month is not a win.
How much can I borrow on the cash-out refinance?
Conventional cash-out refinances on investment properties are commonly capped at about 75% of the appraised value for a single-unit home and 70% for 2–4 units; DSCR and other investor lenders often allow 70%–75%. Your rate, reserves and credit also matter.
How long do I have to wait to refinance?
Many lenders require a “seasoning” period — often 6 to 12 months of ownership — before they will lend against the new appraised value instead of your purchase price. Some investor lenders allow shorter seasoning. Ask before you buy, because the wait adds holding costs.
Is hard money required for BRRRR?
No. You can buy with cash, a home equity line, a private lender or a short-term renovation loan. Hard money is common because it’s fast and finances rehab costs, but it’s expensive — typically double-digit rates plus points — so a quick rehab and refinance matter.
What does “infinite return” mean?
If the refinance returns all the cash you invested (or more) and the property still produces positive cash flow, your cash-on-cash return is mathematically infinite, because you have no cash left in the deal. The calculator shows this when it happens.
Sources
- Fannie Mae Eligibility Matrix (cash-out refinance LTV limits) — Fannie Mae
- Publication 527, Residential Rental Property — Internal Revenue Service
- Mortgages — consumer tools — Consumer Financial Protection Bureau