What is the BRRRR method?
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It is a strategy for building a rental portfolio by recycling the same pool of capital. Instead of leaving a 20–25% down payment in every property, you buy a distressed house below market value, force appreciation through renovation, place a tenant, and then refinance based on the new, higher appraised value. When the numbers work, the cash-out refinance returns most or all of your original investment, ready for the next deal.
- Buy a property that needs work at a meaningful discount to its after-repair value (ARV). Investors often use cash, hard money, or a private lender, because many distressed homes won't qualify for conventional financing in their current condition.
- Rehab it to rent-ready condition. The goal is to add more value than the renovation costs — kitchens, bathrooms, flooring, paint, and deferred maintenance tend to move appraisals the most.
- Rent it to a qualified tenant at market rent. A signed lease and rent history strengthen your refinance application and are often required by DSCR lenders.
- Refinance the short-term financing into a long-term mortgage based on the new appraised value, pulling cash out in the process.
- Repeat by deploying the recovered capital into the next property.
The appeal is capital velocity: money that would otherwise sit idle as equity in one house can control several. The trade-off is leverage. Every refinance adds debt, so each property has to cash-flow on its own after the new mortgage payment — which is exactly what this calculator is built to test.
How to use this calculator
- Enter the purchase and rehab. Add the purchase price, renovation budget, and closing costs. Include holding costs — hard-money interest, property taxes, insurance, and utilities — for every month the property sits vacant.
- Set the refinance terms. Enter a conservative ARV supported by recent comparable sales, your lender's maximum cash-out loan-to-value (LTV), the expected interest rate, the loan term, and closing costs as a percentage of the new loan.
- Add rent and operating expenses. Use market rent from comparable rentals, then annual property taxes and insurance. Vacancy, maintenance and capital expenditures (CapEx), and management are entered as a percentage of rent.
- Read the results. The summary updates as you type: monthly net cash flow, cash-on-cash ROI, total invested, and how much cash stays in the deal after the refinance.
- Stress-test the deal. Drop the ARV by 5–10%, raise the interest rate half a point, and bump vacancy. A deal that still works under pessimistic assumptions is one worth pursuing.
- Check the long-term view. The 10-year chart shows how equity at refinance, cumulative cash flow, loan paydown, and appreciation build wealth. Switch to the table for year-by-year numbers.
Formulas & methodology
Every number in the calculator comes from the formulas below. All math runs locally in your browser — nothing you enter is sent to a server.
All-in = Purchase + Rehab + Closing + (Holding/mo × Months)
Loan = ARV × LTV
Cash left = All-in − (Loan − Refi closing costs)
M = L × r ÷ (1 − (1 + r)^−n)
- L
- Refinance loan amount
- r
- Annual rate ÷ 12
- n
- Loan term in years × 12
- M
- Monthly P&I payment
NOI = Rent − (Taxes + Insurance + Vacancy + Maint/CapEx + Mgmt + HOA)
Cash flow = NOI − M
Cash-on-cash = (Cash flow × 12) ÷ Cash left
DSCR = NOI ÷ Debt service
Cap rate = (NOI × 12) ÷ ARV
Vacancy, maintenance, and management are calculated as a percentage of scheduled gross rent, a slightly conservative simplification. When cash left in the deal is zero or negative, cash-on-cash return is mathematically undefined. If the property still cash-flows, the calculator shows ∞ — the "infinite return" BRRRR investors aim for. The ten-year projection grows rent and operating expenses at the same annual rate, holds the mortgage payment fixed, and appreciates the property from its ARV. It excludes income taxes, depreciation, and selling costs.
Worked example
Suppose you buy a dated three-bedroom house for $140,000, spend $35,000 renovating it over 6 months, and pay $3,500 in closing costs plus $1,100 a month in holding costs. Your all-in cost is $185,100.
After the rehab, the house appraises at $240,000. A 75% cash-out refinance produces a $180,000 loan. After 2.5% closing costs ($4,500), you net $175,500 — recovering 95% of your capital and leaving $9,600 in the deal.
At 6.875% over 30 years, principal and interest is $1,182 a month. Rent of $2,250 less $888 of operating expenses and the mortgage leaves $180 of monthly cash flow, or $2,160 a year. Against $9,600 left in the deal, that is a 22.5% cash-on-cash return, with $60,000 of equity created on day one.
| Line item | Amount |
|---|---|
| All-in cost | $185,100 |
| Refinance loan (75% of ARV) | $180,000 |
| Net refinance proceeds | $175,500 |
| Cash left in deal | $9,600 |
| Monthly cash flow | $180 |
| Cash-on-cash ROI | 22.5% |
| DSCR | 1.15 |
What makes a good BRRRR deal
- All-in cost at or below the refinance LTV. If your lender refinances at 75% of ARV, keeping your all-in cost — including closing and holding costs — near 75% of ARV is what lets you recover your capital. In the example, all-in is 77% of ARV, which is why $9,600 stays in the deal.
- Positive cash flow after the new mortgage. The refinance raises your debt, and the property has to carry it comfortably. Many investors target at least $100–$200 per door per month after reserves.
- A debt service coverage ratio (DSCR) of 1.2 or more. DSCR lenders commonly require 1.0–1.25 at minimum. A higher ratio leaves a cushion for vacancies and repairs.
- A defensible ARV. Base it on recent closed sales of renovated, similar homes in the same neighborhood — not list prices or the best comp you can find.
- Real reserves. Budget maintenance and CapEx even on a fully renovated house. Roofs, HVAC systems, and water heaters still age.
Risks & common mistakes
A low appraisal is the single biggest BRRRR risk. In the example, an appraisal 10% below the expected ARV shrinks the refinance loan by $18,000 — money that stays trapped in the property. Get a realistic ARV before you buy, not after.
Seasoning periods delay the refinance. Lenders often want several months of ownership before lending on the new value, and every extra month adds holding costs and short-term interest.
Rehab overruns erode the spread between all-in cost and ARV. Add a 10–15% contingency to your renovation budget, especially on older homes.
Rate changes hit cash flow directly. On the example's $180,000 loan, a one-point higher rate adds about $123 to the monthly payment. Use the rate slider to see how much headroom your deal has.
Over-leverage is the quiet risk. Pulling out every dollar maximizes returns on paper but leaves thin margins. Keep cash reserves for each property so one bad month doesn't become a forced sale.
Planning a flip instead? Run the numbers through the MAO flip estimator, compare loan programs with the FHA vs. conventional tool, and read the disclaimer before acting on any estimate.
Frequently asked questions
What does BRRRR stand for?
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. You buy a property below its after-repair value, renovate it, place a tenant, refinance into a long-term mortgage based on the higher appraised value, and reuse the cash you pull out on the next property.
What is a good cash-on-cash return for a BRRRR deal?
Many rental investors look for 8–12% or more on the cash left in the deal. Because a successful refinance leaves little of your own money in the property, BRRRR returns are often much higher than on a conventional purchase. When the refinance returns all of your capital, cash-on-cash return is mathematically infinite.
How much cash can I pull out with a cash-out refinance on a rental?
Conventional loans that follow Fannie Mae guidelines typically cap cash-out refinances on a one-unit investment property at 75% of appraised value, and 70% for two- to four-unit properties. DSCR lenders commonly offer 70–80%, with higher LTVs usually priced at higher rates. Lender closing costs come out of your proceeds.
How long do I have to wait before refinancing?
This is called seasoning. Conventional lenders generally require about six months of ownership before they will use the new appraised value for a cash-out refinance, and some DSCR lenders allow three to six months. If you bought with cash, Fannie Mae's delayed financing exception may allow an earlier refinance, but proceeds are generally limited to your documented purchase cost rather than the new value. Confirm current rules with your lender.
Is cash-out refinance money taxable?
Refinance proceeds are loan funds you must repay, so they are generally not treated as taxable income. Interest on the new loan is typically deductible against rental income when the property is a rental. Tax rules depend on your situation, so confirm with a CPA.
What is the difference between BRRRR and a fix-and-flip?
Both start by buying and renovating a distressed property. A flipper sells after the rehab and realizes profit as taxable income. A BRRRR investor keeps the property, refinances to recover capital, and earns ongoing cash flow, loan paydown, and appreciation.
Can I use an FHA or VA loan for BRRRR?
FHA and VA loans are for owner-occupied homes, so they don't fit a classic investor BRRRR. Some investors use a live-in variation: buy a two- to four-unit property with an owner-occupied loan such as an FHA 203(k) renovation loan, live in one unit, rent the others, and later refinance or move out after meeting occupancy requirements.
Where do hard money loan costs go in this calculator?
Add hard money interest to monthly holding costs and include origination points in purchase closing costs. Your cash left in the deal is the same whether you buy with cash or hard money, because the refinance pays off the short-term lender.
BRRRR Calculator by state
Each state edition starts from that state's typical home price, rent, property tax, and insurance, with a worked example and notes on local rules.
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