Phase 2 · Wealth & Leverage
BRRRR Simulator
The whole game is getting your money back out. Model the refinance against your After-Repair Value and see how much capital recycles — and whether the deal still pays you afterward.
How does the BRRRR method recycle your capital?
The refinance is the whole strategy. You buy and rehab for one number, then borrow against the After-Repair Value: refinance loan = ARV × LTV. Whatever that loan doesn't return stays trapped as cash left in deal = all-in cost − refinance loan. Pull all of it back out and the same capital buys the next property.
- Worked example (defaults on this page): $150,000 purchase plus $40,000 rehab is $190,000 all-in. A 75% refinance on a $260,000 ARV lends $195,000 — $5,000 more than you put in, so the deal returns all your capital and the cash-on-cash return is effectively infinite.
- The rental still has to work afterwards: NOI here is $17,856 against $15,568 of debt service on the larger loan, leaving $2,288 of annual cash flow.
- ARV is the entire risk. If the appraisal lands at $230,000 instead, the 75% loan is only $172,500 and $17,500 of your money stays stuck in the deal.
- Refinancing at a higher LTV pulls out more cash but raises debt service — push it far enough and you recycle all your capital into a property with negative cash flow.
Under the hood
The math, fully exposed
BRRRR is two calculations stitched together — a refinance that returns capital, and a rental that must still pay. Both are shown:
All-in cost = purchase + rehab
Refinance loan = ARV × LTV
Cash left in deal = all-in cost − refinance loan
NOI = rent × 12 × (1 − operating expense ratio)
Cash flow = NOI − new debt service (P&I)
Cash-on-cash = annual cash flow ÷ cash left in (∞ if ≤ 0)
- The refinance is the payoff: because the loan is based on ARV, forcing the value up through rehab is what lets you pull capital back out. No equity margin, no BRRRR.
- Infinite return has a cost: the more you pull out, the larger the loan and the heavier the debt service — which can flip a deal cash-flow negative. The art is recycling capital and keeping positive cash flow.
- Costs not shown: closing, holding and refinance fees aren't modeled here. Treat the 70% rule's 30% buffer as the cushion that absorbs them.
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Answers
Frequently asked questions
What is the BRRRR method?
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. You buy a distressed property below value, renovate it to force appreciation, rent it out, then do a cash-out refinance against the new higher value to pull your invested capital back out — and use that same cash to do it again. Done well, you recycle most or all of your money on every deal.
What is ARV and why does it matter so much?
ARV is the After-Repair Value — what the property is worth once the rehab is done. The refinance is based on ARV, not what you paid, so the gap between your all-in cost and ARV × the lender's LTV is exactly how much cash you can pull back out. A solid ARV margin is the entire engine of BRRRR.
What does an "infinite return" mean?
If the cash-out refinance returns all the money you put in (purchase + rehab), you have zero of your own capital left in the deal — yet you still own a cash-flowing asset. Any positive cash flow on zero invested cash is, mathematically, an infinite cash-on-cash return. It's the BRRRR ideal.
What is the 70% rule?
A screening shortcut: don't pay more than 70% of ARV minus rehab costs. On a $260k ARV with $40k of rehab, that's 0.70 × 260k − 40k = $142k max purchase. The 30% buffer covers closing, holding and refinance costs and leaves the equity margin BRRRR depends on.