A BRRRR Example With Real Numbers: One Deal From Offer to Cash Out

Here is one deal with every dollar labelled, from the accepted offer to the money that lands after the cash out refinance. It uses the numbers the calculator loads by default, so you can follow along on the screen.

The short version of the BRRRR math is this. Buy for $300,000, spend $60,000 on the rehab, get a $500,000 appraisal, refinance at 75% of that value and the new loan is $375,000. Purchase plus rehab is $360,000, so the loan covers it with $15,000 to spare. All your cash back, plus a little.

The long version adds eight lines nobody puts on the napkin, and it ends with $27,600 still tied up. Both numbers come from the same house. That gap is where most first BRRRR method deals go sideways.

The house, and what the comps said

Three bedrooms, one and a half baths, dated but structurally sound. Asking $315,000, accepted at $300,000, because the roof and the mechanicals were visibly at the end of their lives and the listing had sat.

The after repair value comes from renovated comps: similar houses on nearby streets, same square footage, sold finished for $490,000 to $510,000. Call it $500,000. The $500,000 ARV page carries this same deal at that value.

Two things to hold onto. The ARV is an estimate until an appraiser signs a report, and the entire refinance is built on it. The rent has to be checked the same way, against leased comparables, not against the mortgage you hope to carry. Here, renovated rentals of this size lease for about $4,400 a month.

Money in at closing

The purchase uses a hard money loan at 90% of price, which is $270,000, with two points. The loan funds nothing else, so the rehab comes out of pocket.

• Down payment, 10% of $300,000: $30,000
• Buyer closing costs at 2%: $6,000
• Points, 2% of the $270,000 loan: $5,400

That is $41,400 to sit at the table. If this is your first deal, the beginner walkthrough explains where each of those lines comes from.

The rehab budget, line by line, plus the contingency

Scope first, contingency second, never one round number.

• Roof: $9,000
• HVAC replacement: $8,000
• Kitchen: $11,500
• Two bathrooms: $8,000
• Flooring throughout: $6,000
• Interior and exterior paint: $4,500
• Electrical panel and fixtures: $3,500
• Plumbing repairs: $1,000
• Landscaping and exterior cleanup: $1,500
• Permits and dumpsters: $1,500

Scope total: $54,500. Contingency at 10%: $5,500. Budget: $60,000.

Line prices move a lot with local labor rates, so treat this as the shape of a budget rather than a price list. What does not move is the habit. Write the contingency as its own line, then spend the scope as if the contingency is not there.

Six months of holding costs nobody budgets for

The $850 a month default is not a guess at a tidy number. It is the cost of owning an empty house.

• Property tax, $6,000 a year: $500 a month
• Insurance, $2,500 a year: about $208 a month
• Utilities, lawn care, snow removal: about $142 a month

Six months of that is $5,100. The larger carry is interest. $270,000 at 11%, interest only, is $2,475 a month, so six months is $14,850. Every extra month costs $3,325 between the two.

One warning on insurance. The $2,500 is a landlord policy. While the house is vacant and under construction you need vacant property or builders risk coverage, which usually costs more, so get the quote instead of reusing the rental figure.

The appraisal and the new loan at 75% LTV

The appraisal lands at $500,000. At 75% loan to value the new loan is $375,000.

• New loan: $375,000
• Less hard money payoff: $270,000
• Less refinance closing costs at 3%: $11,250
• Cash out: $93,750

Cash left in the deal and what the return looks like

Total project cost: $300,000 purchase, $6,000 closing, $60,000 rehab, $5,400 points, $14,850 interest, $5,100 holding. That is $391,350. Subtract the $270,000 loan and the cash invested is $121,350.

Cash out was $93,750, so $27,600 stays in the deal. Recovery is 77%.

Now the rental. $4,400 a month with 5% vacancy collects $50,160. Take out $6,000 of taxes, $2,500 of insurance and 18% of collected rent for maintenance, reserves and management, and net operating income is about $32,600. The payment on $375,000 at 7.25% over 30 years is $2,558 a month, or $30,700 a year. Cash flow is roughly $1,900 a year, cash on cash on the $27,600 is 7.0%, and the debt service coverage ratio is 1.06. Equity after the refinance is $125,000.

So this is not an infinite return. It is a 77% recovery, thin positive cash flow and six figures of equity. Full recovery needed a purchase price nearer $275,000, which the full formula solves directly. The 70% rule would have capped the offer at $290,000, which is closer to right than $300,000 and still not all the way there.

Three things that would have broken this deal

An appraisal at $460,000. That is 8% low, which happens on renovated property. The loan falls to $345,000, closing costs to $10,350, cash out to $64,650, and cash left in more than doubles to $56,700. Cash flow actually improves to about $4,400 a year because the loan is smaller, but the money is stuck.

A rehab 25% over and two months late. $75,000 of work instead of $60,000, plus $4,950 of extra interest and $1,700 of holding. Cash invested rises to $143,000 and cash left in to $49,250. The refinance does not change, because the appraiser pays no attention to your budget.

A refinance rate of 8.5% instead of 7.25%. The payment becomes $2,884 a month, $34,600 a year, against $32,600 of net operating income. Cash flow goes negative by about $2,000 and the coverage ratio drops to 0.94. Lender floors vary, commonly somewhere between 1.0 and 1.25, so the likely result is a smaller loan rather than a bad one, which leaves more cash in the deal.

The first two cost you recovery. The third attacks the rental itself, which is the worse of the two problems.

Run it with your own numbers

The BRRRR Calculator on the home page opens with this exact deal: $300,000, $60,000, $500,000 and $4,400 a month. Change one line at a time and watch the cash left in the deal move. When you are ready to price a real address, the steps in order are in how to start.