RealInvestorX
Deal analysis by strategy
How to analyze a BRRRR deal, starting from the refinance
A BRRRR deal lives or dies on the refinance appraisal, not the purchase price. Start there, work backward to the most you can pay, then stress the after-repair value.
Illustrative inputs for learning, not market data or a forecast. Replace every number with figures from your own deal.
Step 1: work backward to a maximum offer
The refinance loan is a fixed share of the after-repair value (ARV), so it sets how much cash the deal can return. Using $235,000 ARV, a 75% refinance and a $40,000 rehab, the loan is $176,250.
To pull out every dollar, price plus 3% closing plus rehab must not exceed that loan: ($176,250 - $40,000) / 1.03 = $132,282. At that price the calculator shows cash left of $0.
Step 2: price the deal you are actually looking at
- All-in cost at $150,000 purchase = price + closing + rehab = $194,500.
- Refinance loan = $176,250, so cash left in the deal = $18,250.
- After the refinance at 7%, rent of $2,100 a month gives cash flow of $145 a month and DSCR 1.12.
- Cash-on-cash on the cash you left in: 9.5%. If cash left is zero or negative the return is infinite, which is why you also look at monthly cash flow and DSCR.
Step 3: stress the ARV
Appraisals miss. If the same property appraises at $211,500 (10% lower), the refinance loan drops to $158,625 and cash left rises from $18,250 to $35,875. Decide before you buy whether you can leave that much in, and for how long.
Checklist before you make the offer
- Three recent comparable sales of renovated homes, not listings, supporting the ARV.
- A written rehab scope with a contingency; add holding costs, interest while vacant and refinance fees to the rehab line, because the calculator has no separate field for them.
- Your lender's seasoning period and maximum loan-to-value on a cash-out refinance, confirmed in writing.
- Post-refinance DSCR at least at your lender's minimum, using the refinance rate, not today's hard-money or cash terms.
- A plan if the refinance falls short: keep the property as a rental on the original financing, or sell.
Common mistakes
- Using the best comparable for ARV instead of the median renovated sale.
- Forgetting that the old loan, if any, must be repaid from the refinance proceeds.
- Counting rent from the day of purchase when the property is vacant during the rehab.
- Treating a high cash-on-cash on a tiny remaining investment as proof of a good deal; check absolute monthly cash flow.
Frequently asked questions
What is the BRRRR method?
Buy, rehab, rent, refinance, repeat: buy a distressed property, renovate it, rent it, refinance on the higher appraised value to recover cash, and reuse that cash on the next purchase.
Do I always get all my money back?
No. Whether you recover all of it depends on the purchase price, rehab cost, ARV and the refinance loan-to-value. Work the numbers backward before you buy.
Does this calculator include holding costs?
It does not have a separate line. Add interest, utilities and fees during the rehab to the rehab budget field.