How do I calculate a profitable BRRRR deal?

Calculate a BRRRR deal in five steps: total all-in cost (purchase + closing + rehab + financing carry during rehab), set a supportable ARV from sold comps in the same condition, model the cash-out refinance at the lender's LTV (typically 70-75% of ARV), compute capital left in the deal (all-in - refi proceeds), and verify post-refi cash flow stays positive after the new payment. Take an Allegheny County single-family BRRRR with $112,000 all-in and a $165,000 ARV at 75% LTV: you pull $123,750 out, fully recycle capital, and net roughly $70/month cash flow at 7.5% on the new loan.

The 5-step BRRRR calculation

The whole strategy lives or dies on whether step 4 hits zero (or close). If you can repeatedly recycle 90-100% of your capital into the next deal, you compound a portfolio faster than any rate of return on any single property.

Step 1: Total all-in cost

Add every dollar between offer and rent-ready:

• Purchase price
• Acquisition closing costs (lender fees if hard money, title, transfer tax, attorney)
• Rehab as a realistic line-item budget. DealScanner does not bake a contingency multiplier into its rehab estimate - if you want a buffer, add it explicitly.
• Financing carry during rehab: monthly hard money interest while the loan is open. Multiply by your honest rehab timeline (Pittsburgh permit + winter realities can stretch this).
• Refinance closing costs (often 1.5-3% of new loan amount)

Be honest. Underestimating any line here is the single most common reason BRRRR deals leave money trapped.

Step 2: Set a supportable ARV

ARV drives the entire refinance. Lenders order an appraisal - and the appraiser uses sold comps, not your spreadsheet. Pull comparable single-family sales within a half-mile, sold in the last 6 months, with similar bed / bath / sqft and in the same condition you plan to deliver. Anchor to the median, not the maximum. See how to find ARV comps in Pittsburgh for the methodology.

Step 3: Model the cash-out refinance

Pittsburgh-area DSCR and conventional cash-out refinances on stabilized rentals typically allow 70-75% LTV on ARV (with seasoning - usually 6 months from purchase). Your refinance proceeds:

Refi Proceeds = ARV x LTV - Refi Closing Costs

Confirm the lender's seasoning rule. Some allow "delayed financing" inside 6 months at all-in cost basis (not ARV) which can leave money trapped.

Step 4: Capital left in the deal

Capital Left In = Total All-In - Refi Proceeds

This is the actual scoreboard. Goals:

• Zero or negative = full BRRRR. You pulled out everything you put in (and possibly more). Recycle into next deal.
• $5,000-$15,000 trapped = imperfect BRRRR. Acceptable if cash flow + appreciation justify the trapped capital.
• $25,000+ trapped = this is a regular rental purchase, not a BRRRR. Either ARV or rehab math was off.

Step 5: Verify post-refi cash flow

The bigger refi loan = bigger payment. Confirm rent still covers PITI + operating expenses with margin:

Monthly Cash Flow = Rent - Vacancy Reserve - Operating Expenses - New PITI

If post-refi cash flow goes negative, you successfully recycled capital but you bought a money-losing rental. Both legs have to work.

A Pittsburgh BRRRR walked through, step-by-step

Single-family 3/1 in the Mon Valley, distressed listing at $48,000. Renovated single-family 3/1 comps in the same school district and same finished condition median $165,000.

All-in cost:

• Purchase: $48,000
• Acquisition closing + hard money points (2): $4,200
• Rehab (line items: full kitchen, bath, mechanicals, paint, floors): $52,000
• Financing carry (5 months at hard money 11% on $48k loan): $4,800
• Refi closing costs: $3,000
• Total all-in: $112,000

Refinance: ARV $165,000 x 75% LTV = $123,750 gross - $0 closing (already counted) = $123,750 proceeds

Capital left in: $112,000 - $123,750 = -$11,750 (you pulled out $11,750 more than you put in - a textbook BRRRR)

Post-refi cash flow: Rent $1,475/month, operating expenses (taxes, insurance, vacancy 7%, maintenance 8%) ~$440/month, new PITI on $123,750 at 7.5% / 30yr ~$865/month. Monthly cash flow = $1,475 - $440 - $865 = ~$170/month. Positive - and you have all your capital back to do it again.

Note the trade: this BRRRR fully recycled capital but the cash flow margin is razor-thin. If rates rise or rent dips, you go negative. A more conservative BRRRR leaves $10-15k trapped and prints $200+/month - your call which trade-off fits your strategy.

Common BRRRR calculation mistakes

• Optimistic ARV. Appraisers anchor to median comps in the same condition, not your single best comp.
• Forgetting refi closing costs. 2-3% of the new loan is real money.
• Ignoring financing carry. Hard money at 10-12% on $50k for 6 months is $2,500-$3,000 just in interest.
• Skipping the cash flow check. A "perfect" capital recycle on a property that bleeds $150/month is not a win.
• Wrong seasoning assumption. Delayed financing inside 6 months may be capped at acquisition cost, not ARV.