BRRRR method calculator

How the numbers work

A BRRRR deal runs in three stages, and the calculator follows them in order. Before the refinance, your cash is whatever the short-term lender did not fund, plus closing costs and every month of holding costs and interest while the work is done. At the refinance, a new long-term loan is sized on the after-repair value. It pays off the short-term loan and its own closing costs first; what remains comes back to you. After the refinance, the rent has to carry the new, larger loan.

The formula

Cash left in = cash put in − (refinance loan − short-term loan − refinance closing costs)

When the refinance returns everything you put in, the cash left in is zero or less. The calculator then shows no cash-on-cash percentage at all: a return on no money is not a return, and dividing by zero or a negative number would print a figure that means nothing.

A worked example

The calculator opens on a $200,000 purchase needing $50,000 of work, 85% of both funded by a short-term loan for 5 months. You put in $57,740. Refinanced at 75% of a $330,000 after-repair value, the new loan returns $30,000, so $27,740 stays in the deal and 52% of your cash comes back.

Every figure there is an example to replace with your own deal, not a benchmark.

What the result depends on

Almost everything rests on the after-repair value, which is your estimate until an appraiser sets it. The loan-to-value the new lender offers, the months until it will refinance, and how the rehab money is drawn all move the answer too. If the all-in cost is more than the after-repair value, the work has not added the value it cost, and the calculator says so.

What this leaves out

Interest is charged on the whole short-term loan for every month, which overstates it when rehab money is drawn in stages. Points and fees on that loan belong in closing costs. Tax is not modelled, and neither is a lender's rule on how long you must own the property before refinancing: add that wait to the months.