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

How to use the BRRRR calculator

Fill in the deal in the order it happens:

• Purchase price you paid or plan to offer.
• Rehab cost, the full budget including a contingency.
• After-repair value (ARV), what the property should appraise for once the work is done. Base it on recent sales of fixed-up homes nearby, not on hope.
• Refinance LTV and rate. The loan-to-value your lender will allow on the refinance, and the interest rate on the new 30-year loan.
• Monthly rent you expect after the rehab.
• Monthly expenses: taxes, insurance, maintenance, capital expense reserve, vacancy and management. Leave out the mortgage; the tool works it out.

You get three results: cash left in the deal, monthly cash flow after the new payment, and cash-on-cash return.

The BRRRR formulas

• Refinance loan = ARV x LTV
• Cash left in the deal = purchase price + rehab - refinance loan
• Monthly cash flow = rent - expenses - new mortgage payment (principal and interest)
• Cash-on-cash return = (monthly cash flow x 12) / cash left in the deal

If the refinance loan is bigger than what you put in, you’ve pulled out more than you spent. The cash-on-cash figure is no longer meaningful at that point, because you have no cash left in the deal.

A worked BRRRR example

You buy a tired three-bedroom for $140,000 cash and spend $35,000 on the rehab, so $175,000 is in the deal. Comparable renovated homes support an ARV of $230,000. Your lender offers a 75% LTV cash-out refinance at 7.25% for 30 years.

• Refinance loan: $230,000 x 0.75 = $172,500
• Cash left in the deal: $175,000 - $172,500 = $2,500
• New principal and interest: $1,176.75 a month
• Rent $1,950, expenses $650, so monthly cash flow: $1,950 - $650 - $1,176.75 = $123.25
• Annual cash flow: about $1,479
• Cash-on-cash: $1,479 / $2,500 = about 59%

That 59% looks spectacular, but it’s mostly a product of having only $2,500 left in. The more useful number is the $123 a month. One water heater or one vacant month uses up a year of it.

What a good BRRRR result looks like

For a small landlord, a good BRRRR deal does two things. It returns most of your cash, so you can buy again, and it still cash-flows after the refinance with a full set of expenses counted. If you have to drop the expense line or stretch the rent to make the cash flow positive, the deal works only on paper.

Test the downside. Cut the ARV by 10% and add 15% to the rehab. In this example, an ARV of $207,000 gives a $155,250 loan, the rehab grows to $40,250, and $25,000 stays in the deal. If you’d still be glad to own the property on those numbers, it’s a sound deal.

Limits and caveats

• Refinance costs are extra. Closing costs on the refinance, holding costs during the rehab and any hard-money interest all add to the cash in the deal. Add them to the rehab line if you want them counted.
• Seasoning rules. Many lenders want you to own the property for a set period before they’ll lend on the new appraised value instead of your purchase price. Ask before you buy.
• The appraisal decides. Your ARV is an estimate; the lender’s appraiser sets the real number.
• Taxes aren’t modeled. Refinance proceeds aren’t taxable income, but depreciation, interest deductions and your own tax bracket change the real return. Talk to a tax professional before you scale up.