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BRRRR calculator.
Both loans, and the ceiling that actually binds. Most BRRRRs are limited by rent coverage rather than by value, which is the part that leaves capital stuck in the deal.
The refinance is sized by the lower of two ceilings: the LTV against the appraised value, and the largest loan that still holds 1.25 coverage of gross rent over PITIA. The income test is the one that usually binds, and it is the reason a BRRRR leaves capital in the deal. Taxes and insurance sit in the lender's ratio; vacancy, management and repairs do not, which is why they are entered separately. The bridge rate below is an assumption you can change rather than a quote, since pricing is set by credit, experience and the deal; the refinance terms are typical market figures rather than my quotes.
Cash left in the deal
You leave $14,690 in the deal and clear $292 a month, a 23.9% return on the cash still in it.
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This sends the numbers above straight to me. You get a written term sheet inside 24 to 48 hours, and a straight answer if it does not work.
How to read it
What the number means.
A BRRRR is two loans wearing one strategy, and it succeeds or fails on the second one. The refinance is sized by the lower of two ceilings: a percentage of the appraised value, and the largest loan that still holds the required coverage of gross rent over principal, interest, taxes, insurance and any association dues.
The income test is usually the one that binds, and that is the answer to why a BRRRR that looked like it would pull all the capital out leaves a chunk of it behind. A property can appraise beautifully and still not support the loan you wanted, because the rent has to service it.
Taxes and insurance sit inside the lender's ratio. Vacancy, management and repairs do not, which is why they are entered separately here: they are real costs to you and invisible to the coverage test, and confusing the two is how a deal that qualifies still loses money.
Questions
About the arithmetic.
Why does my refinance come back smaller than the value supports?
Because the rent has to cover it. The coverage test caps the loan independently of the appraisal, and on most BRRRRs it is the binding constraint rather than the LTV.
What is left in the deal?
Whatever the refinance did not return of the money you put in, plus anything the carry consumed. A BRRRR that leaves nothing behind is unusual, and a model that predicts it usually has an optimistic rent or an optimistic value in it.
How long before I can refinance at the new value?
That is a seasoning question and it varies by program. It is the single most common thing that turns a good BRRRR into an expensive bridge loan, so it is worth confirming before you buy rather than after.
Should vacancy and management be in the ratio?
Not in the lender's ratio, but absolutely in yours. The coverage test tells you whether the loan gets approved. It does not tell you whether the property makes money.
Method
Where these numbers come from.
BRRRR financing: how the two loans actually fit together
BRRRR needs a bridge loan and a refinance that agree with each other. Here is how the pieces connect, and where the cash gets trapped.
BRRRR seasoning: how long before you can refinance at the new value
Seasoning is the rule that decides whether you get your capital back in month four or month twelve. Confirm it before you buy, not after the rehab is done.
DSCR loan requirements: how the ratio works and what it has to hit
A DSCR loan qualifies the property, not you. Here is how the ratio is calculated, the number it needs to clear, and how to fix a file that misses.
Other tools
The rest of them.
Hard money loan calculator, Fix and flip calculator, ARV calculator, DSCR calculator, Rehab cost calculator, Construction loan calculator, Rental portfolio calculator, Transactional funding calculator.
This is an estimating tool. It runs arithmetic on the figures you enter using the assumptions stated above, and changing an assumption changes the answer. The result is not a quote, an approval, an appraisal, a valuation, or a prediction of what a property will sell for, and it does not commit anyone to lend. Costs, taxes and market conditions vary by location and change over time. Check the numbers that matter against your own contractor, agent and professional advisers before you commit to a deal.
When the numbers work
Get it priced.
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