What makes a BRRRR deal work?

Buying materially below market value and renovating efficiently. If your all-in cost is 75% or less of the after-repair value, the refinance can typically return most or all of your capital.

How long must I own before a cash-out refinance?

Most lenders impose a seasoning period of six to twelve months before they will lend against the new appraised value rather than the purchase price.

What is the biggest BRRRR risk?

A low appraisal. If the property appraises below your projected ARV, the refinance returns less cash and you are left with more capital tied up than planned.

How many years should I plan to stay before buying makes sense?

Typically three to seven years. Transaction costs of about 9% round trip take years of principal paydown and appreciation to overcome.

Does this account for tax benefits?

No. Mortgage interest deduction, depreciation and capital gains exclusions can meaningfully change the outcome. Consult a tax professional for your situation.

Investment Analysis

BRRRR & Rent vs Buy Calculator

Cash-out refinance results and a rent-versus-buy comparison.

Mode

BRRRR inputs

Given

Purchase price

Rehab cost

Purchase closing costs

Holding costs during rehab

After repair value

Refinance LTV

Refi rate

Refi term

yrs

Refi costs

Monthly rent

Operating expenses

% of rent

BRRRR results

Computed

Cash left in the deal

$8,500

All-in $199,000 · refinance proceeds $190,500

Total all-in cost$199,000

New loan at refinance$195,000

Net cash returned$190,500

New monthly payment$1,330.24

Monthly cash flow$34.76

Cash-on-cash return4.91%

Equity after refinance$65,000

Forced equity created$61,000

Appraisals on refinance frequently come in below the ARV you projected. Model a conservative ARV before committing to the deal.

$8,500 left in · $35/mo

How this is calculated

BRRRR stands for buy, rehab, rent, refinance, repeat. The strategy works by creating equity through renovation, then recovering the invested capital with a cash-out refinance based on the new appraised value rather than the original purchase price:

all-in cost = purchase + rehab + closing + holding

new loan = ARV × refinance LTV ÷ 100

cash left in deal = all-in cost − (new loan − refinance costs)

When the refinance returns everything you put in, cash left in the deal is zero and the cash-on-cash return becomes mathematically infinite — the property produces income against no remaining capital. That outcome requires buying well below market value and controlling the rehab budget tightly.

The rent-versus-buy comparison weighs two different paths for the same money. Buying builds equity through principal paydown and appreciation, but carries interest, taxes, maintenance and roughly 3% to buy plus 6% to sell in transaction costs. Renting leaves the down payment free to be invested:

buy position = future value − selling costs − remaining balance

rent position = down payment × (1 + investment return)^years

Because transaction costs are front-loaded, the break-even point for buying is usually somewhere between three and seven years depending on appreciation and the rent-to-price ratio in your market.

Worked example

Recycling capital with a BRRRR

Buy a distressed duplex for $260,000 cash plus $70,000 renovation: $330,000 all in.
Stabilized value appraises at $430,000; a 75% cash-out refinance returns $322,500.
Cash left in the deal = 330,000 − 322,500 = $7,500 — most of your capital is back out.
The refinanced loan must still cash-flow: at $2,900/mo rent and ≈ $1,950/mo expenses, debt service near $2,000/mo leaves roughly break-even cash flow.
The return is driven by the equity captured ($100,000 on $7,500 left in), not the monthly cash flow.

Common mistakes

Assuming the appraisal will cooperate
The refinance amount is set by the appraiser's value, not your renovation receipts. If the appraisal comes in $40,000 low, the cash you recover drops by $30,000 at a 75% loan-to-value.
Refinancing into negative cash flow
Pulling maximum cash out maximizes the new payment. A deal that cash-flowed at purchase can bleed monthly after the refinance — model debt service at the new balance before committing.
Comparing rent vs buy on payment alone
Owning adds taxes, insurance, maintenance and transaction costs; renting adds flexibility. The honest comparison totals both sides over the years you actually expect to stay.