The BRRRR method: costs, refinance and cash left invested
BRRRR means buy, rehab, rent, refinance and repeat. The idea is to improve a property, rent it out and use a refinance to recover some of the cash invested. Whether that works depends on the purchase, renovation, rent, appraisal and available financing.
Budget the purchase and the work
Add the down payment or cash purchase, closing costs, renovation, financing charges and the costs of holding an empty property. Keep a separate contingency for work that changes after you start. A distressed property is not automatically easy to finance or a bargain after repairs.
Use the cash-to-close calculator for the purchase budget. It separates settlement cash from repairs and reserves; it does not model construction lending or a refinance.
Check the rental income
Use comparable rentals to estimate rent, then include vacancy, management, taxes, insurance, maintenance and replacement savings. Check whether comparable rentals support the rent you expect after renovations.
Work through the refinance
Cash released = new loan − existing loan payoff − refinance costs.
Suppose an appraisal is $150,000 and a lender permits a loan of 75% of that value. The new loan would be $112,500. With an $80,000 payoff and $4,000 refinance costs, cash released would be $28,500. If you put in $45,000 before refinancing, $16,500 of that cash remains invested.
These are example figures, not a loan quote. Confirm valuation, loan limits, timing, reserves, fees and qualification with your lender. Cash released through borrowing is not profit; it must be repaid.
Check cash flow after the new loan
A larger loan can release cash and increase the monthly payment at the same time. Calculate operating cash flow using the proposed new payment. Also test a lower appraisal, extra rehab costs and a delayed refinance. You may need to leave more cash invested than planned.
The DSCR tool compares rent and operating income with debt payments. It is not a loan approval. The main analyzer estimates a rental held under one financing structure; it does not model the BRRRR refinance sequence.
Before repeating the process
Review the first project’s actual costs and rent before committing cash to the next property. Keep reserves available for the property you already own. A successful refinance alone does not show that the rental is producing the return you want.