How to Calculate a BRRRR Deal: Step-by-Step Guide

The six numbers in a BRRRR calculation

Every BRRRR deal is decided by six figures. Get them in this order, because each one depends on the one before it.

The ARV deserves the most care. Use renovated homes that have sold, not asking prices, and read our guide to calculating ARV before trusting any estimate. A 10% miss on ARV is a 10% miss on the refinance loan.

Step 1: work out the maximum purchase price

Two rules give you a ceiling. The flipper's 70% rule is the more conservative and the one most BRRRR investors use when making offers. The 75% rule is the true BRRRR test, applied to everything you spend.

The 30% discount covers your closing costs, holding costs and margin of error. Paying above it does not make a deal impossible, but it moves the deal toward Deal B in the 75% rule examples, where cash stays stuck in the property.

Step 2: add up the all-in cost

All-in cost is every dollar between the offer and the refinance. Investors routinely count the purchase and the rehab and forget the rest, which is how a deal that misses gets recorded as a pass.

• Purchase price
• Buy-side closing costs, usually 2% to 3% of the price
• Rehab budget from contractor bids, plus a 10% to 20% contingency
• Holding costs for the rehab, the lease-up and the seasoning period: taxes, insurance, utilities, and interest on any short-term loan

Example uses public listing data for illustration. See disclaimer.

Step 3: size the refinance and the cash that comes back

The refinance loan is the appraised value times the lender's loan-to-value cap, typically 75%. From that loan, subtract whatever loan you used to buy and the refinance closing costs. What is left is the cash that returns to you.

Two lender checks sit on top of the LTV cap. The property must appraise at your ARV, and the rent must cover the new payment at the lender's required debt service coverage ratio, usually 1.2. Either one can shrink the loan below 75% of ARV.

The complete walkthrough: a $280,000 ARV deal

A cosmetically dated three-bedroom, two-bath house in a neighborhood where renovated homes sell for $280,000. The rehab is kitchens, baths, flooring and paint, bid at $40,000. Here is the whole deal, number by number.

Example uses public listing data for illustration. See disclaimer.

Step 4: the check most BRRRR calculators skip

Capital recovery says nothing about whether the property can carry its new loan. Run the post-refinance cash flow before you celebrate the $6,000, because at 2026 rates a 75% loan is a heavy payment.

That is the honest shape of many 2026 BRRRR deals: the capital math passes, the rent barely does. Three levers fix it. Buy for less, raise the rent with the rehab, or self-manage. Each $100 of monthly cash flow adds $1,200 a year of NOI and lifts the DSCR by about 0.07.

Example uses public listing data for illustration. See disclaimer.

Where BRRRR calculations go wrong

The arithmetic is simple. The inputs are where deals fail. These are the errors that show up most often when a BRRRR does not return the capital it was supposed to.

1. 1

   Overestimating ARV

   Use sold, renovated comparables, not listings and not the best sale on the street. A 10% miss on ARV in the example above cuts the refinance loan by $21,000 and turns the $6,000 surplus into $15,000 stuck.
2. 2

   Underestimating the rehab

   Get line-item bids before you buy and add 15% to 20% on top. One surprise (a sewer line, a roof, a panel) is the difference between full recovery and a year of waiting.
3. 3

   Forgetting holding costs

   Taxes, insurance, utilities and loan interest run for the whole rehab, lease-up and seasoning period. Budget for eight to twelve months, not for the rehab alone.
4. 4

   Not asking the refinance lender first

   Confirm the LTV cap, the seasoning requirement, the DSCR minimum, and whether the lender uses appraised value or purchase price before you buy. Terms differ enough between lenders to change the verdict.
5. 5

   Renovating for the wrong neighborhood

   Finishes above what the comparables have do not appraise higher. Match the quality level of the sold comps you used for the ARV.

Want to run these numbers yourself? The free BRRRR calculator runs the whole waterfall online with no signup, and the same math ships as a spreadsheet with live formulas.