BRRRR Deal Example: From Purchase to Refinance

Scenario overview across the five BRRRR stages

Assume an investor is evaluating a fictional property priced at $210,000. The acquisition uses a 20% down payment and an 8% initial loan amortized over 30 years. The project budgets $55,000 for rehabilitation, $6,000 for purchase closing costs, and $7,000 for holding costs outside scheduled initial mortgage payments.

After a six-month rehab, the educational scenario assumes $2,900 of monthly rent and a $335,000 after-repair value. A refinance at 75% of the assumed appraisal, 6.75%, and 30 years is used to repay the remaining initial debt and recover part of the invested cash.

These numbers are not an actual property, appraisal, contractor bid, loan offer, or prediction. ARV, rent, project duration, costs, and refinance eligibility all require verification. The exercise asks where cash and debt move at each stage, not whether the strategy is guaranteed to work.

Stage 1 and 2: Buy the property and fund the rehab

The down payment is $42,000, leaving an initial loan of $168,000. During the six-month rehab, the calculator models scheduled initial mortgage payments totaling $7,396.35. Of that amount, $687.72 reduces the balance and $6,708.63 is interest.

Total cash invested is $117,396.35. Total project cost is a different measure because the calculator includes the purchase price and initial interest but does not treat principal repayment as an additional project cost. Keeping those definitions distinct prevents the same borrowed principal from being counted more than once.

A real budget would be supported by scope, bids, contingency, draw timing, permits, utilities, security, taxes, and insurance. This calculator groups non-mortgage holding costs into one input, so the article does not claim that every possible cost has been itemized. A schedule delay would extend financing exposure and may change both capital required and refinance timing.

Stage 3: Stabilize rent, expenses, and NOI

The stabilized rental begins with $2,900 of scheduled monthly rent. Vacancy is 5%, management is 8%, and maintenance is 5%. Property tax, insurance, and other monthly expenses are then added to form monthly operating expenses.

The BRRRR calculator includes vacancy within its monthly operating-expense total and calculates management and maintenance from scheduled rent. That definition differs from some rental models, so outputs should be reconciled before comparing them. The refinance mortgage is not included in NOI. It is subtracted afterward when cash flow and DSCR are calculated.

Stabilized rent is an assumption, not a guarantee created by completing rehab. Lease-up time, concessions, tenant screening, utility responsibility, local rules, and property condition can change realized income. Tax and insurance may also change after acquisition or renovation. Verification should occur before the refinance is treated as feasible.

Stage 4 and 5: Refinance and measure cash left

At a $335,000 appraisal and 75% LTV, the new loan is $251,250.00. Gross refinance proceeds are new borrowed money. The calculator subtracts the remaining initial loan balance and $6,000 of refinance costs to produce net proceeds of $77,937.72.

Cash returned is not profit. It is primarily funded by a new liability secured by the property. Cash left in the deal is also not automatically a loss: it represents unrecovered invested capital under these definitions, while the investor may also have modeled equity and a continuing rental operation. Neither amount states the property’s eventual sale profit or total return.

Sensitivity: reduce the appraisal to $300,000

The downside case changes only ARV/appraisal from $335,000 to $300,000. Refinance LTV remains 75%, and acquisition, rehab, initial financing, rent, operating expenses, refinance rate, term, and costs remain unchanged. That isolates the effect of an appraisal shortfall.

A lower appraisal produces a smaller refinance loan and returns less cash, leaving more investor capital in the deal. It also creates a smaller new payment, so post-refinance cash flow improves under otherwise identical rental assumptions. This is a tradeoff rather than a free benefit: capital recovery weakens even though debt service falls.

The sensitivity demonstrates why the strategy cannot rely solely on a target ARV. Comparable sales, completed scope, appraisal methodology, market timing, lender rules, and property eligibility can all influence the refinance. A contingency plan should address both a smaller loan and a delayed refinance.

Interpret the BRRRR result without assuming a guaranteed repeat

The base case describes a path from acquisition through a modeled refinance and stabilized rental. It does not establish that the project can be completed on budget, leased at the assumed rent, appraised at ARV, or refinanced on the entered terms. It also does not model income taxes, depreciation, sale costs, contractor disputes, permitting delays, or every lender charge.

Before proceeding, verify title and acquisition costs, document rehab scope and contingency, inspect major systems, confirm permits, obtain insurance suitable for renovation and rental use, support rent with relevant evidence, and review operating costs. Discuss refinance seasoning, valuation, LTV, reserves, DSCR, borrower requirements, and closing costs with potential lenders without treating an initial conversation as approval.

Track capital by stage. Purchase and rehab cash are outflows. Initial principal payments reduce debt. Refinance proceeds repay old debt and may return capital, but the new loan remains. Rental NOI describes operations before new debt service; cash flow describes the remainder afterward. These labels make it harder to confuse liquidity with profit.

The practical conclusion is conditional: the base appraisal recovers more capital, while the lower appraisal leaves more cash invested and reduces the new payment. Whether either structure is acceptable depends on verified costs, liquidity, financing terms, property operations, and risk tolerance. The example supports scenario planning, not a categorical investment decision.