The BRRRR Method: How to Run the Numbers
BRRRR lives or dies on one number: how much of your capital comes back out at the refinance.
$11k or $1,157
Capital back out, or cash flow. At current rates, rarely both.
The five steps, as numbers
- 1Buy — below market, usually with cash or short-term financing. Your ceiling comes from the 70% rule, adjusted upward for BRRRR because you are not paying selling costs.
- 2Rehab — scope and budget, plus 15–20% contingency. This is the estimate that most often destroys the deal.
- 3Rent — you need a signed lease before most lenders will refinance on the property’s income.
- 4Refinance — a new loan at up to 70–75% of the after-repair value. This is where the capital comes back.
- 5Repeat — with whatever came back out.
Capital left in = All-in cost − Net refinance proceeds
If this number is at or near zero, you have recycled your capital. If it is large, you have simply bought a rental with a renovation attached.
A worked BRRRR
All-in cost
- Purchase price
- $150,000
- Purchase closing costs
- $4,500
- Rehab budget (including contingency)
- $45,000
- Holding costs — 6 months of taxes, insurance, utilities, interest
- $9,000
All-in: $208,500
After the rehab the property appraises at an after-repair value of $270,000 and rents for $2,300 a month. Operating honestly — 5% vacancy, 8% management, 5% maintenance, 8% CapEx on renovated-but-not-new systems, $3,400 taxes, $1,500 insurance — NOI comes to $15,524.
Now the decision the whole strategy turns on:
| Refinance at 75% LTV | Refinance at 65% LTV | |
|---|---|---|
| New loan | $202,500 | $175,500 |
| Refinance closing costs | −$5,000 | −$5,000 |
| Net proceeds | $197,500 | $170,500 |
| Capital left in the deal | $11,000 | $38,000 |
| Annual debt service at 7.25% | $16,577 | $14,367 |
| Annual cash flow | −$1,053 | $1,157 |
| DSCR | 0.94 | 1.08 |
| Cash-on-cash return | Negative on $11,000 | 3.0% on $38,000 |
This is the 2026 BRRRR problem in one table
Why cash-on-cash breaks down here
With $11,000 left in, any positive cash flow would produce a huge cash-on-cash return, and at zero capital left in the metric is undefined — the famous “infinite return”. It is also meaningless: a tiny denominator makes any numerator look spectacular, and a negative numerator over a tiny denominator is a catastrophe dressed as a rounding error.
For BRRRR, judge the deal on three things instead: capital left in (did you recycle?), DSCR (does the refinanced property stand on its own?), and equity created (ARV minus all-in cost — here, $61,500). Those three answer the question honestly where a return percentage does not.
The four risks, in order of how often they bite
| Risk | Typical size | Mitigation |
|---|---|---|
| Rehab overrun | 10 – 30% over budget | Contingency of 15–20% inside the budget, not on top of it. Get a written scope, not a number. |
| ARV comes in low | 5 – 15% below expectation | Pull your own comps before buying. A $20,000 ARV miss removes $15,000 of refinance proceeds at 75% LTV. |
| Timeline slip | 2 – 6 months | Every extra month is holding cost, and on short-term financing it is expensive holding cost. |
| Rate moves before the refinance | Unbounded | You buy at today’s rate and refinance at a future one. Test the deal a full point higher before committing. |
Note how the first two compound: a 20% rehab overrun ($9,000) plus a 10% ARV miss ($27,000, of which $20,250 is lost proceeds) turns $11,000 of capital left in into roughly $40,000 — the deal did not fail, it just stopped being a BRRRR.
Making it work at current rates
| Lever | Effect |
|---|---|
| Buy further below the 70% line | The only lever that improves every other number at once. |
| Target higher-rent-to-value assets | A property renting at 1.1% of ARV supports far more debt than one at 0.85%. |
| Refinance at 65–70% rather than 75% | Trade capital recycling for a property that stands on its own. |
| Force more value than you spend | Equity created is the durable win even when cash flow is thin. |
| Choose a lender with short seasoning | Getting to the refinance faster cuts holding costs materially. |
Run both refinance scenarios properly before you buy — not after. The free calculator will give you cash flow and DSCR at each loan amount, and the full analyzer lets you save both versions side by side so the comparison is a document rather than a memory.
Frequently asked questions
How do you calculate a BRRRR deal?
Add purchase price, closing costs, rehab and holding costs to get your all-in figure. Multiply the after-repair value by the refinance loan-to-value limit, subtract refinance closing costs, and compare the result to your all-in cost. The difference is the capital left in the deal — the number the whole strategy is judged on.
What LTV can I refinance a BRRRR at?
Typically 70 to 75% of the after-repair value for a single-family investment property. Conventional lenders usually require six to twelve months of seasoning before lending against the new value; many DSCR lenders will do it at three to six months.
Is BRRRR still viable in 2026?
It works, but the maximum cash-out version frequently leaves a property that does not cover its own mortgage, because refinance rates now exceed the yield on the finished asset. The practical adaptation is to buy further below the maximum offer, target higher rent-to-value properties, and accept leaving some capital in so the property stands on its own.
What does infinite return mean in BRRRR?
It describes pulling all of your capital back out at the refinance, leaving zero invested — at which point cash-on-cash return is mathematically undefined. It is a poor way to judge the deal, because it tells you nothing about whether the refinanced property covers its payment. Look at capital left in, DSCR and equity created instead.