How the BRRRR Calculator Works

One calculation engine produces every number on this site, from the homepage calculator to the tables on the ARV and price pages. This page documents what it does so you can check it.

Acquisition and rehab

buy closing costs    = purchase price × buyer closing %
short-term loan      = purchase price × short-term LTV %
points and fees      = short-term loan × points %
holding interest     = short-term loan × rate / 12 × months (interest only)
holding costs        = monthly holding costs × months
total project cost   = purchase + closing + rehab + points + interest + holding
cash invested        = total project cost − short-term loan

Rehab is treated as paid in cash. If a lender funds part of the rehab, raise the short-term LTV to approximate it.

The 70% rule

purchase + rehab vs ARV  = (purchase + rehab) / ARV
70% rule max offer       = 0.70 × ARV − rehab

Refinance

refinance loan     = ARV × refinance LTV %
refinance costs    = refinance loan × refinance closing %
cash out           = refinance loan − short-term loan − refinance costs
cash left in deal  = cash invested − cash out
recovery           = cash out / cash invested
equity after refi  = ARV − refinance loan
equity created     = ARV − total project cost

The short-term loan is repaid in full at the refinance. Any prepayment penalty or extension fee on it should be added to holding costs.

The rental after refinance

payment          = amortizing payment on the refinance loan at the refinance rate and term
effective income = rent × 12 × (1 − vacancy %)
expenses         = taxes + insurance + HOA × 12 + (maintenance + capex + management %) × effective income
NOI              = effective income − expenses
cash flow        = NOI − payment × 12
cash on cash     = cash flow / cash left in deal (infinite when cash left ≤ 0 and cash flow > 0)
DSCR             = NOI / annual debt service
cap rate on cost = NOI / total project cost

Solvers for full cash recovery

Full recovery means cash out equals cash invested, which reduces to: refinance loan × (1 − refinance closing %) = total project cost.

ARV needed        = total project cost / ((1 − refi closing %) × refi LTV)
refi LTV needed   = total project cost / ((1 − refi closing %) × ARV)
max purchase      = found by bisection, since points, interest and closing scale with price

Rating bands

• All cash back: recovery 100% or more
• Strong: 75% to 100%
• Partial: 50% to 75%
• Weak: under 50%
• No cash out: refinance does not cover the payoff and costs

Assumptions on the ARV and price pages

• Purchase at 60% of ARV (price pages derive ARV from price the same way)
• Rehab at 15% of ARV, rounded to $1,000
• Buyer closing 2%; short-term loan 90% of price at 11% with 2 points; 6 months to refinance
• Holding costs 0.17% of ARV per month, rounded to $25
• Rent 0.85% of ARV per month, rounded to $25; vacancy 5%; taxes 1.2% and insurance 0.5% of ARV; maintenance 5%, capex 5%, management 8%
• Refinance 75% LTV at 7.25%, 30 years, 3% costs

Every assumption can be replaced in the homepage calculator.

Rounding

Dollar figures are rounded to the nearest dollar for display and computed unrounded, so a displayed price may reproduce a cash-left figure a few dollars from zero.

Source code

The engine is a small TypeScript module with unit tests covering the acquisition phase, the refinance, the rental, and all three solvers.