BRRRR calculator: how much cash comes back at refinance, and what the rental earns

• Cash invested is the down payment, closing costs, inspection, and the rehab. The rehab is your repair budget plus a contingency percentage, plus carrying costs and permits. The purchase loan is not counted as cash in, because the refinance repays it.
• The refinance loan is the after repair value times the loan-to-value percentage. From that loan the lab subtracts the original loan balance (purchase price minus down payment) and the refinance closing costs. What is left is cash recovered.
• Cash left in the deal is cash invested minus cash recovered. Cycle efficiency is cash recovered divided by cash invested.
• Monthly cash flow is rent after vacancy, minus your monthly expenses, minus the principal and interest payment on the new loan. Cash-on-cash return is that cash flow for a year divided by the cash left in the deal.
• Total ROI adds the equity created by the rehab (after repair value minus purchase price minus rehab costs) to one year of cash flow, then divides by cash invested.

The lab opens on these numbers: $36,000 down, $5,400 closing costs, and $500 for inspection. The rehab is a $25,000 budget with 10% contingency, $3,000 of carrying costs, and $1,000 of permits, which comes to $31,500. Cash invested is $73,400. At a $260,000 appraisal and 75% loan-to-value, the refinance loan is $195,000. After repaying the $144,000 purchase loan and $3,000 of closing costs, $48,000 comes back, which is 65.4% of the cash invested. That leaves $25,400 in the deal. Rent of $2,200 less 5% vacancy is $2,090. After $550 of expenses and a $1,363 payment on the new loan, the rental clears $177 a month, an 8.34% cash-on-cash return on the $25,400 still in. The lab flags that cash flow as under $200 a month.

• The original loan balance is the purchase price minus the down payment. The lab does not model interest paid on that loan during the rehab, so enter it in carrying costs.
• Monthly expenses are one number you type. Property tax, insurance, maintenance, and any management fee all have to be inside it, because the lab adds only the loan payment on top.
• The refinance assumes the appraisal matches the after repair value you enter. A lower appraisal shrinks the loan and the cash recovered together.
• Lenders often require you to own the property for a set period before a cash-out refinance and often cap the loan at a share of value. The lab does not model either rule.
• Total ROI counts equity from the rehab as if it were a return. That equity is not cash until you sell or refinance again, and income tax is not modeled.

Finance Quest is educational. It is not financial advice, and no calculator here knows your full situation.

Every result here flows from the after repair value you type in. At 75% loan-to-value, each $10,000 of appraisal changes the refinance loan by $7,500, and that moves cash recovered, cash left in the deal, and cash-on-cash return. A repair budget that runs over has the opposite effect: it raises cash invested without raising the appraisal. Running a lower value and a higher rehab cost shows how much of the first result depends on them.

The lesson for this lab is in Chapter 12, Real Estate & Property Investment. Read the lesson

• Rental propertyCash flow, cap rate, and cash-on-cash with vacancy and upkeep counted.
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