How to Analyze a BRRRR Deal Step by Step

The BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat) is one of the most powerful ways to build a rental portfolio with limited capital. The idea is simple: buy a distressed property below market value, renovate it, rent it out, refinance based on the new appraised value, and pull your cash back out to do it again.

But running the numbers correctly is critical. A deal that looks great on paper can fall apart if your rehab costs run over, the property does not appraise where you expected, or the refinance does not return enough cash. This guide walks through how to analyze a BRRRR deal step by step, using a sample deal with real numbers.

The Five Numbers That Matter

Every BRRRR analysis starts with five inputs: purchase price, rehab budget, after-repair value (ARV), expected monthly rent, and your refinance terms. Everything else flows from these. Get them right and the rest of the analysis falls into place. Get any one of them materially wrong and the deal can go sideways fast.

For this walkthrough, here is our sample deal:

Purchase Price: $120,000. This is a distressed single-family home purchased below market value.

Rehab Budget: $30,000. Full renovation including kitchen, bathrooms, flooring, paint, and some mechanical work.

After-Repair Value (ARV): $200,000. Based on comparable sales in the neighborhood for renovated homes of similar size.

Monthly Rent: $1,800. Based on comparable rentals in the area for renovated single-family homes.

Total Project Cost: $150,000 (purchase + rehab). With an ARV of $200,000, you have $50,000 in built-in equity from day one. That spread between project cost and ARV is what makes the BRRRR strategy work.

Step 1: Calculate Your Cash In

Before the refinance, you need to fund the acquisition and rehab. If you are paying cash for both, your total cash in is $150,000 plus closing costs (typically 2% to 4% of purchase price). If you are using a hard money or bridge loan to fund the acquisition, the math changes. A common structure is borrowing 85% of the project cost at 12% interest with 2 origination points on a 12-month term. The lender covers most of the cost, but you are paying interest during the rehab period and points upfront.

For simplicity, assume you are paying cash for the purchase and rehab. With $4,800 in closing costs (4% of purchase), your total cash in is $154,800.

Step 2: Estimate Your Refinance Proceeds

This is the step that determines whether the BRRRR actually works. Most conventional lenders will refinance at 75% of the appraised value. If the property appraises at $200,000, your new loan is $150,000.

After paying refinance closing costs (typically 2% to 3% of the loan amount, or roughly $3,000 to $4,500), you receive somewhere around $146,000 to $147,000 in cash. Against a total investment of $154,800, that leaves roughly $8,000 to $9,000 of your own money still in the deal.

That is a good BRRRR. You recovered the vast majority of your capital and still own a $200,000 property with $50,000 in equity. The dream scenario is getting all your cash back, and some BRRRR deals achieve that, but having a small amount left in is perfectly normal and still produces excellent returns.

Step 3: Calculate Your Cash Flow After Refinance

Now you have a $150,000 loan on a property renting for $1,800 per month. Your monthly costs are the mortgage payment plus operating expenses.

At a 7% interest rate on a 30-year term, the monthly mortgage payment on $150,000 is roughly $998. Add insurance ($150/month), taxes ($200/month), property management at 8% ($144/month), vacancy reserve at 5% ($90/month), and CapEx reserve at 5% ($90/month), and your total monthly expenses are roughly $1,672.

Monthly cash flow = $1,800 - $1,672 = $128 per month, or about $1,536 per year.

Step 4: Evaluate the Key Metrics

Cash Left in Deal: Roughly $8,000 to $9,000, depending on exact closing costs. This is the number that makes BRRRR unique. Instead of having $40,000 to $50,000 tied up in a traditional buy-and-hold, you have less than $10,000 at risk.

Cash-on-Cash Return: $1,536 annual cash flow / $8,500 cash left in deal = 18.1%. That is a strong CoC return. And it is only this high because the refinance pulled most of your capital back out. The property's cash flow in absolute dollars is modest, but relative to the cash you have tied up, it is excellent.

10-Year IRR: This accounts for cash flow growth over time, loan paydown by tenants, and appreciation. With 3% annual rent growth and 3% appreciation, a deal like this might show an IRR in the 20% to 30% range, depending on exact assumptions. The IRR gives you the complete picture of total return, not just year-one cash flow.

Step 5: Stress-Test Your Assumptions

The numbers above assume everything goes according to plan. In practice, three things commonly go wrong with BRRRR deals:

The rehab costs more than expected. A $30,000 budget that turns into $45,000 changes the entire deal. Your total project cost jumps to $165,000, and if the property still appraises at $200,000, the 75% LTV refinance ($150,000) leaves $15,000 more in the deal. Your CoC drops significantly. This is why experienced investors build a 10% to 20% contingency into their rehab budget from the start.

The property does not appraise at the expected ARV. If the appraisal comes in at $180,000 instead of $200,000, your refinance loan is only $135,000. Now you have over $19,000 left in the deal instead of $8,500. The strategy still works, but it ties up more capital than planned. Getting accurate comparable sales before you buy is essential.

Vacancy or rent is lower than projected. If the property sits vacant for two months during the initial lease-up, that is $3,600 in lost income during your first year. If market rents are actually $1,600 instead of $1,800, your cash flow drops to near zero after expenses. Run the analysis at multiple rent and vacancy levels to see where the deal breaks.

Step 6: Compare to Other Strategies

One of the most useful things you can do with any BRRRR analysis is to also run the numbers as a straight buy-and-hold and as a flip. The same property might work differently under different strategies.

As a buy-and-hold with a conventional 20% down payment ($40,000 on a $200,000 purchase), the CoC return will be lower because you have more cash invested, but you avoid the rehab risk and the refinance uncertainty. As a flip, you sell after rehab and take the profit without the ongoing landlord responsibilities, but you give up the long-term wealth-building from rental income and appreciation.

The Deal Analyzer calculates all three strategies from a single set of inputs, so you can see the trade-offs side by side and pick the strategy that fits each specific deal.