Overview
Analyzing a BRRRR deal happens in two phases. First you analyze the buy and rehab to find the most you can pay while still recovering your capital on the refinance. Then you analyze the rent and refinance to confirm the property will cash flow after the new mortgage. A BRRRR deal works when your total all-in cost stays below your refinance amount, and the rent comfortably covers the new loan payment.
Key Takeaways
- A BRRRR analysis has two phases: the buy and rehab (can you buy low enough to get your cash back?) and the rent and refinance (will it cash flow?).
- The first test is capital recovery: your total all-in cost has to stay below your refinance amount, which is about 70 to 75 percent of the After Repair Value.
- The second test is cash flow: the rent has to cover the new mortgage with margin, a DSCR of roughly 1.20 to 1.25, or the deal will not cash flow and may not even refinance.
- These two tests are separate. You can buy cheap enough to recover your capital and still have a deal that does not cash flow, so you have to check both.
- Unlike a flip, a BRRRR offer has no selling costs and is not built around a lump-sum profit. It is built around getting your cash back and owning a property that pays you every month.
The Two Phases of a BRRRR Analysis
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BRRRR deal is really two investments stacked on one property: a short-term value-add project on the front end, and a long-term rental on the back end. So you analyze it in two phases:
- Phase 1, the Buy and Rehab. This looks a lot like analyzing a flip. You forecast the value, estimate the rehab, and work out the most you can pay. The difference is your goal: instead of a sale profit, you are solving for the price that lets you pull your cash back out on the refinance.
- Phase 2, the Rent and Refinance. This is the rental analysis. You forecast the rent, the new mortgage, and the operating costs to confirm the property cash flows and that a lender will actually refinance it.
A deal has to pass both. Let us walk through each.
Phase 1: Analyze the Buy and Rehab
Step 1: Forecast the After Repair Value
Everything starts with the ARV, the appraised value the property will hit once it is renovated, because your entire refinance is sized off it. Pull recent sold
comps that match your finished product and be conservative, since the appraiser will be too.
Step 2: Estimate the Rehab
Build a detailed
rehab estimate from a real scope of work. In a BRRRR you are renovating for a tenant and an appraiser, not a retail buyer, so budget durable, functional finishes rather than the most expensive ones. Every dollar should raise the appraised value or the rent.
Step 3: Calculate Your Maximum Purchase Price
Here is where BRRRR differs from a flip. A flip's
maximum purchase price subtracts selling costs and a target profit. A BRRRR does neither, because you are not selling. Instead, you work backward from your refinance amount so that your total all-in cost lets you recover your capital:
BRRRR Max Purchase Price = (ARV x Refinance LTV) - Rehab Costs - Buying, Holding & Financing Costs
If a lender will refinance at 75 percent of a $300,000 ARV, that is a $225,000 refinance. Subtract your rehab and other costs, and whatever is left is the most you can pay and still pull all your cash back out. Pay more than that, and you leave cash trapped in the deal.
Phase 2: Analyze the Rent and Refinance
Step 4: Confirm You Recover Your Capital
This is the test that defines BRRRR. Compare your total all-in cost to your refinance amount:
BRRRR Max Purchase Price = (ARV x Refinance LTV) - Rehab Costs - Buying, Holding & Financing Costs
Step 5: Confirm the Property Cash Flows
Recovering your capital is only half of it. If the property does not cash flow after the new mortgage, you have created a money-losing rental. Two things to check:
Does it cash flow? Net Cash Flow = Monthly Rent - New Mortgage Payment (PITIA) - Operating Reserves (vacancy, maintenance, management, capex). You want this comfortably positive, not break-even.
Will it pass DSCR? Lenders size a
DSCR loan on the property's rent, not your income. DSCR is your rent divided by the full mortgage payment (principal, interest, taxes, insurance, HOA). Most lenders want about 1.20 to 1.25, meaning rent that is 120 to 125 percent of the payment. If your DSCR is too low, the lender shrinks the loan or declines it, which breaks your capital recovery.
Step 6: Check Your Seasoning
Most lenders require you to own the property about 6 months before they will refinance against the full post-rehab value. Factor that holding time into your financing costs, because you are carrying the short-term loan until then.
A Full BRRRR Deal Analysis Example
Let us run a complete deal through both phases.
Phase 1: The Buy and Rehab
| Input |
Amount |
| After Repair Value (ARV) |
$300,000 |
| Purchase price |
$145,000 |
| Rehab |
$60,000 |
| Buying, holding & financing costs |
$25,000 |
| Total all-in cost |
$230,000 |
Phase 2: The Refinance
The lender refinances at 75 percent of the appraised value:
- Refinance loan: $300,000 x 75% = $225,000
- Cash left in the deal: $230,000 all-in - $225,000 refinance = $5,000
- Equity after refinance: $300,000 value - $225,000 loan = $75,000
| Item |
Monthly |
| Market rent |
$2,600 |
| New mortgage payment (PITIA) |
−$1,975 |
| Operating reserves (vacancy, maintenance, capex, mgmt) |
−$375 |
| Net cash flow |
$250 |
- DSCR: $2,600 rent / $1,975 payment = 1.32 (above the 1.20 to 1.25 lenders want)
- Annual cash flow: $250 x 12 = $3,000
- Cash-on-cash return: $3,000 / $5,000 left in = 60%
This is a working BRRRR. You recovered nearly all your cash, the deal clears DSCR, it cash flows $250 a month, and you own a property with $75,000 in equity while only $5,000 of your own money stays in it. That $5,000 producing $3,000 a year is why BRRRR returns look the way they do.
Now change one number. Say you overpay and buy at $165,000 instead of $145,000. Your all-in jumps to $250,000, but your refinance is still capped at $225,000, so now $25,000 of your cash is trapped in the deal, and your cash-on-cash return collapses from 60 percent to 12 percent. Same property, same rent, one bad number on the buy. That is why you run the analysis before you offer.
Let the Calculator Do the Math
Analyzing both phases by hand is exactly where BRRRR deals go wrong, a missed cost or a wrong assumption and your numbers are off by thousands. Our
BRRRR calculator runs both phases for you: your maximum purchase price and capital recovery on the buy and rehab, then your rent, mortgage, cash flow, DSCR, and long-term return after the refinance. You will know whether a deal pencils in minutes, before you make an offer.
Frequently Asked Questions
How do you analyze a BRRRR deal?
You analyze it in two phases. First, the buy and rehab: forecast the ARV, estimate the rehab, and calculate the most you can pay while keeping your all-in cost below your refinance amount. Second, the rent and refinance: confirm the property cash flows and passes DSCR so you recover your capital. A deal works only when it passes both.
How do you know if a BRRRR deal is good?
A good BRRRR deal does two things: it lets you pull most or all of your cash back out on the refinance, and it cash flows comfortably after the new mortgage. If your all-in cost stays at or below about 70 to 75 percent of the ARV and the rent gives you a DSCR of 1.20 or higher with positive cash flow, the deal works.
What is a good DSCR for a BRRRR deal?
Most lenders want a DSCR of about 1.20 to 1.25, meaning the rent is 120 to 125 percent of the full mortgage payment. A higher DSCR gives you better loan terms and more cash flow cushion, so aim above the minimum rather than right at it.
How is analyzing a BRRRR different from analyzing a flip?
A flip analysis subtracts selling costs and a target profit to find your offer, because you are selling at the end. A BRRRR analysis has no selling costs and no lump-sum profit. Instead, you solve for the price that lets you recover your capital on the refinance, then confirm the property cash flows as a long-term rental.
How much cash flow should a BRRRR property have?
There is no universal number, but you want it comfortably positive after accounting for vacancy, maintenance, management, and capital expenditure reserves, not just break-even on the mortgage. Thin cash flow leaves no cushion for a bad month, and lenders will not refinance a property that barely covers its payment.
