BRRRR Calculator: Cash Left in the Deal, Cash Flow and Return

A BRRRR deal works when the cash-out refinance on the after-repair value (ARV) returns most of the money you spent buying and fixing the property. Cash left in the deal = purchase + closing + rehab + holding costs − (new loan − refinance costs − any purchase loan paid off). In the default deal $201,200 goes in, a 75% refinance on a $260,000 ARV is a $195,000 loan, and only $12,200 stays in the property while it cash flows $-103.47 a month.

How the calculator works

Holding cost = months of rehab × monthly carrying costs (taxes, insurance, utilities, interest on a purchase loan). New loan = ARV × refinance LTV. The monthly payment uses the standard amortization formula: $1,363.47 on $195,000 at 7.5% for 30 years. Cash flow = rent × (1 − vacancy) − operating expenses − payment. Cash-on-cash return = yearly cash flow ÷ cash left in; when the refinance returns everything you put in, the return is unlimited because none of your money is left in the deal.

The ARV decides the deal

Everything hangs on the appraisal after the rehab. A lower appraisal shrinks the loan dollar for dollar times the LTV, leaving more cash in the property. Run a conservative ARV from recent sales of renovated comparable homes, not list prices.

Refinance rules to plan around

Fannie Mae's Selling Guide (B2-1.3-03, cash-out refinance) requires at least one borrower to have been on title for six months before the new loan, and a first mortgage being paid off must be at least 12 months old; buyers who paid cash can use delayed financing instead. Lenders cap cash-out on investment property, commonly at 70% to 75% of the appraised value. DSCR lenders size the loan on the rent instead of your income; the calculator shows the debt service coverage ratio so you can see whether rent covers the payment.

• Using the purchase price as the ARV The refinance is based on the new appraisal. If the rehab doesn't add value, the money doesn't come back.
• Forgetting holding costs Six months of taxes, insurance, utilities and loan interest can add thousands to what you have in the deal.
• Ignoring the new payment Pulling all your cash out means a bigger loan. Check that the rent still covers the payment and expenses.
• Under-budgeting operating costs Taxes, insurance, repairs, capital expenses and management often take 35% to 50% of rent.

The 70% rule

A common screen for the purchase price: pay no more than 70% of ARV minus the rehab. For a $260,000 ARV and $40,000 rehab that is $142,000. It is a rule of thumb, not a guarantee; run the full numbers above.

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