BRRRR strategy modeler: buy, rehab, rent, refinance, repeat
Short answer
A BRRRR deal works when the refinance at the after-repair value returns most of your cash. Capital left in the deal equals everything you invested (down payment, closing, renovation and holding costs) minus the new loan after it pays off the purchase loan.
Model your deal, phase by phase
Capital left in the deal
$48,400
75.4% of the $196,400 you put in came back at the refinance.
Cash in and out, phase by phase
Cash you put in Cash returned
The refinance
After the refinance
$148,000 is free to fund the next deal repeat.
How much capital stays in if the appraisal or the lender changes?
Capital left in the deal. Teal cells mean all your money comes back.
| Refi LTV \ ARV | $504,000 | $532,000 | $560,000 | $588,000 | $616,000 |
|---|---|---|---|---|---|
| 65% | $168,800 | $150,600 | $132,400 | $114,200 | $96,000 |
| 70% | $143,600 | $124,000 | $104,400 | $84,800 | $65,200 |
| 75% | $118,400 | $97,400 | $76,400 | $55,400 | $34,400 |
| 80% | $93,200 | $70,800 | $48,400 | $26,000 | $3,600 |
How much capital stays in a $400,000 BRRRR deal?
Buying at $400,000 with 25% down, renovating for $60,000 plus 10% contingency and holding for six months puts $196,400 of your cash into the deal.
Refinancing at 80% of a $560,000 after-repair value gives a $448,000 loan. After paying off the purchase loan, $148,000 comes back, leaving $48,400 in the deal with $65 a month of cash flow.
How do I analyze a BRRRR deal?
- 1
Buy
Add the down payment and closing costs. If you finance the purchase, note the loan, which the refinance will pay off.
- 2
Rehab
Add the renovation budget with a contingency, and the interest and carrying costs while the property is empty.
- 3
Rent
Estimate rent, vacancy and operating costs to find the net operating income the refinance lender will look at.
- 4
Refinance
The new loan is the appraised after-repair value times the lender's loan-to-value. It pays off the purchase loan and returns the rest to you.
- 5
Repeat
Capital left in the deal is what you invested minus what came back. The less that stays in, the faster you can buy the next property.
Frequently asked questions
What is the BRRRR method?
Buy a property below its potential value, renovate it, rent it out, refinance at the new appraised value to pull your cash back out, and repeat with the next property.
How much can you refinance a rental property in Canada?
Most lenders refinance rentals to at most 80% of the appraised value, and some cap at 75%. Many also want the renovation finished and the property rented before using the new value.
What is capital left in the deal?
It is the cash you invested that the refinance did not return. In the example, $196,400 goes in and $148,000 comes back, so $48,400 stays in the deal (75.4% recovered).
Where do these numbers come from?
All inputs are your assumptions. Refinance limits vary by lender; mortgages use semi-annual compounding. Income tax is not included.