How the BRRRR math works
Cash left in deal = All-in cost − (ARV × Refinance LTV)
All-in cost is the purchase price, rehab, closing costs and holding costs (interest, utilities, insurance and taxes while you renovate). After the rehab, a lender refinances based on the new value. If the loan covers your whole cost, you've recycled all your cash into the next deal.
Example
You buy for $150,000, spend $40,000 on the rehab and $11,000 on closing and holding costs: $201,000 all in. The home appraises at $260,000 and the lender refinances at 75% LTV, a $195,000 loan. Only $6,000 stays in the deal. At 7.5%, the new mortgage is about $1,363, so $2,000 rent minus $700 of expenses leaves a small negative cash flow. A slightly higher rent or lower rate would fix it.
What makes a BRRRR work
Buying well below value. The refinance can only return your money if the after-repair value is far enough above your total cost, which is why the purchase price matters more than anything else.
Common questions
What is a seasoning period?
Many lenders require you to own the property for 6–12 months before they'll refinance based on the new appraised value.
What LTV do lenders offer?
Cash-out refinances on investment properties are typically 70–75% of appraised value.