How the BRRRR math works
A BRRRR deal succeeds when the refinance gives you back most of the cash you put in, and the rent still covers the new, larger loan. The calculator follows the money through each stage:
- 1
Buy
Cash in = down payment + purchase closing costs + points on any short-term purchase loan. - 2
Rehab and hold
Add the rehab budget, plus monthly holding costs and purchase-loan interest for the longer of your rehab time and the lender’s seasoning wait. - 3
Rent
Net operating income (NOI) = rent × 12 × (1 − vacancy) − operating expenses. - 4
Refinance
New loan = after-repair value (ARV) × the lender’s loan-to-value. Cash back = new loan − purchase-loan payoff − refinance closing costs. - 5
Repeat
Cash left in the deal = total cash in − cash back. That is the money tied up until you sell or refinance again.
Worked example
You buy a $200,000 house with $6,000 of closing costs using a short-term loan for 80% of the price at 11% interest-only plus 2 points. You spend $50,000 on the rehab and hold for six months at $800 a month. It appraises at $320,000 and rents for $2,800.
| Line | Amount |
|---|---|
| Down payment (20%) | $40,000 |
| Closing costs + 2 points on $160,000 | $9,200 |
| Rehab | $50,000 |
| Holding costs ($800 × 6) | $4,800 |
| Purchase-loan interest ($160,000 × 11% ÷ 12 × 6) | $8,800 |
| Total cash in | $112,800 |
| Refinance loan (75% of $320,000) | $240,000 |
| Pay off purchase loan | −$160,000 |
| Refinance closing costs | −$6,000 |
| Cash back to you | $74,000 |
| Cash left in the deal | $38,800 |
You recover 65.6% of your cash. With rent of $2,800, 5% vacancy and $9,000 of yearly operating costs, NOI is $22,920. The new $240,000 loan at 7.25% for 30 years costs $1,637.22 a month, leaving about $273 a month of cash flow. That is an 8.4% cash-on-cash return on the $38,800 still in the deal, and you keep $80,000 of equity (ARV minus the new loan).
Refinance rules to check before you buy
The refinance terms decide whether the plan works, and they are set by the lender. For loans that follow Fannie Mae’s rules, its Selling Guide section B2-1.3-03 (dated December 10, 2025) says:
- At least one borrower must have been on title for at least six months before the new loan is disbursed.
- An existing first mortgage being paid off must be at least 12 months old, measured from note date to note date.
- After an all-cash, arm’s-length purchase, the “delayed financing” exception can allow a refinance sooner, but the new loan can be no more than your documented initial investment plus financed closing costs, prepaid fees and points.
- Maximum loan-to-value comes from Fannie Mae’s Eligibility Matrix, and pricing adjustments can apply based on LTV and credit score.
Many investors refinance with lenders that don’t follow Fannie Mae’s rules, and those lenders set their own seasoning, LTV and rate. Get the refinance terms in writing before you close on the purchase, and enter them in the calculator.
Edge cases
- If the refinance doesn’t cover the purchase-loan payoff and costs, you bring cash to closing. The calculator warns you.
- If cash left in the deal is zero or negative, cash-on-cash return is unlimited. Check that cash flow is still positive.
- For taxes, the IRS treats work that betters or restores a property as an improvement you capitalize and depreciate, not a repair you deduct (Publication 527).
Next steps
Check the refinanced loan with the DSCR calculator, compare the result with simply selling using the house flipping calculator, and test the purchase quickly with the 1% rule calculator.