A full BRRRR deal worked end to end at 75% LTV, then re-run through the five failure modes that actually sink it — with the dollar delta on each.
BRRRR math is one line — Refi Loan = ARV x Refinance LTV % — and every failure mode in the strategy is a failure to predict one of those two variables, or a cost that piled up while you waited to find out. Most BRRRR content models the happy path. This models the same deal five ways it goes wrong, with the dollar delta on each.
A base case, every step shown, formulas matching how CasaWise models them.
Acquisition and rehab
| Line | Amount |
|---|---|
| Purchase price | $180,000 |
| Down payment (20%) | $36,000 |
| Acquisition loan | $144,000 (interest-only, 10%) |
| Loan points (2) | $2,880 |
| Purchase closing costs | $5,400 |
| Rehab budget | $50,000 |
Cash Invested = Down Payment + Rehab + Closing Costs + Loan Points = $36,000 + $50,000 + $5,400 + $2,880 = $94,280
The hold — six months, no rent
Holding Costs = (Monthly Mortgage + Prorated Tax + Prorated Insurance) x Hold Months
Interest-only on $144,000 at 10% is $1,200/month. Taxes and insurance on the pre-rehab basis run $165 and $67.50. That is $1,432.50 a month, or $8,595 over six months. Total capital deployed before the refinance: $102,875.
The refinance
ARV appraises at $290,000. The lender writes 75%.
Refi Loan = $290,000 x 0.75 = $217,500 Cash Recouped = $217,500 - $144,000 = $73,500 Refi closing costs (2% of loan) = ($4,350) Net cash back to you = $69,150 Capital left in the deal = $102,875 - $69,150 = $33,725
The new payment, amortised 30-year fixed at 6.67% — the 30-year fixed average for the week of 13 Aug 2026 — is $1,399.15/month, or $16,789.80 a year.
Stabilised operations, rent at $2,750, vacancy at 8%:
Effective Gross Rent = $2,750 x 12 x (1 - 0.08) = $30,360.00 Fixed costs (tax 1.1% + insurance 0.45% of $290,000) = $4,495.00 Revenue-based (management 8% + maintenance 5% of EGR) = $3,946.80 CapEx reserve (5% of EGR) = $1,518.00 NOI = $30,360.00 - $9,959.80 = $20,400.20 Annual Cash Flow = $20,400.20 - $16,789.80 = $3,610.40 ($300.87/mo) DSCR = $20,400.20 / $16,789.80 = 1.22 Cash-on-Cash = $3,610.40 / $33,725 = 10.71% Cap rate on stabilised value = $20,400.20 / $290,000 = 7.03%
That is a good deal. It clears the 1.20 DSCR most lenders require, it produces a 7.03% cap on the value you created, and 67% of your capital came back out.
Notice what carries it: rent is 0.95% of ARV, at the very top of the CasaWise rent ratio curve where 0.65% is par. The base case clears DSCR because rent-to-value is near the ceiling — not because BRRRR is generous.
Notice one more thing. 0.70 x $290,000 - $50,000 = $153,000, so buying at $180,000 fails the 70% Rule by $27,000. That is normal, and worth stating plainly: a deal that passes the 70% Rule and refinances at 75% of ARV returns more than you put in almost by definition, because 75% exceeds 70%. Most real BRRRRs leave capital in.
You did not buy an ARV. You bought a hypothesis about one, and an appraiser resolves it after the rehab money is already spent. Appraisal lands at $266,800 — 8% under, a $23,200 miss.
| Plan | Appraised 8% under | Delta | |
|---|---|---|---|
| ARV | $290,000 | $266,800 | −$23,200 |
| Refi loan (75%) | $217,500 | $200,100 | −$17,400 |
| Refi closing (2%) | $4,350 | $4,002 | −$348 |
| Net cash back | $69,150 | $52,098 | −$17,052 |
| Capital left in deal | $33,725 | $50,777 | +$17,052 |
| New payment | $1,399.15 | $1,287.22 | −$111.93 |
| DSCR | 1.22 | 1.32 | +0.10 |
| Cash-on-cash | 10.71% | 9.76% | −0.95pp |
Read the leverage: every dollar of ARV miss costs 75 cents of recouped capital. A 5% miss on this ARV traps $10,875; a 10% miss traps $21,750. There is no operational fix after closing — you bring cash to the table or you leave it in the wall.
The counterintuitive part is that the property got safer. Smaller loan, lower payment, DSCR up to 1.32, monthly cash flow up to $412.79. What broke was the strategy, not the asset. BRRRR is a capital-velocity play, and a low appraisal converts it into an ordinary buy-and-hold you overpaid to create.
The refinance is a new loan priced on the day it closes, not the day you bought. Between purchase and stabilisation sits the rehab plus whatever seasoning your lender requires before lending against appraised value instead of cost — months of rate exposure you do not control. Same $217,500 loan, 100 basis points higher at 7.67%:
| 6.67% | 7.67% | |
|---|---|---|
| Monthly payment | $1,399.15 | $1,546.19 |
| Annual debt service | $16,789.80 | $18,554.28 |
| Annual cash flow | $3,610.40 | $1,845.92 |
| Monthly cash flow | $300.87 | $153.83 |
| DSCR | 1.22 | 1.10 |
| Cash-on-cash | 10.71% | 5.47% |
$147.04 a month is the entire delta, and it cuts annual cash flow by 49% and drops DSCR under 1.20.
Then the second-order effect people miss. The lender does not just quote a worse rate — they size the loan to their DSCR test. At 1.20 minimum, maximum debt service is $20,400.20 / 1.20 = $17,000.17, a payment of $1,416.68. At 7.67% that supports about $199,280, not $217,500. The rate move alone shaves $18,220 off your recouped capital before anyone has questioned your ARV. Rate risk and appraisal risk compound.
Every month of overrun is debt service plus taxes plus insurance on an asset producing nothing. Rehab goes to $62,000 and the hold stretches from six months to ten:
Cash Invested = $36,000 + $62,000 + $5,400 + $2,880 = $106,280 Holding Costs = $1,432.50 x 10 = $14,325 Total deployed = $120,605 Refinance is unchanged: net cash back = $69,150 Capital left in the deal = $51,455
That is $17,730 more capital trapped — $12,000 rehab, $5,730 pure carry on an empty building — and cash-on-cash falls from 10.71% to 7.02% with no change to a single operating assumption. Plus $11,000 of gross rent you never collected, which appears on no cash-invested line but is gone all the same. Holding costs are the quietest line in a value-add budget and the one most likely to eat the margin — the same dynamic that governs fix-and-flip budgeting, where the clock, not the materials, kills the deal.
This is the classic. You pulled your capital out, you are proud of the execution, and the property now loses money every month. The mechanism is usually a rent estimate that was 15% optimistic. Rent comes in at $2,300, not $2,750:
Effective Gross Rent = $2,300 x 12 x 0.92 = $25,392.00 Fixed costs = $4,495.00 Revenue-based (13% of EGR) = $3,300.96 CapEx reserve (5% of EGR) = $1,269.60 NOI = $16,326.44 Annual Cash Flow = $16,326.44 - $16,789.80 = -$463.36 (-$38.61/mo) DSCR = $16,326.44 / $16,789.80 = 0.97 Cash-on-Cash = -1.37%
A $450/month rent miss moves NOI by $4,073.76 a year — $339.48 a month — and that is the whole distance between $300.87 positive and $38.61 negative.
A DSCR of 0.97 means the property does not cover its own debt before any surprise, and lenders require 1.20+, so this loan does not get written at this rent — you find out at underwriting, after the rehab money is spent. Of the four pillars, cash flow is the only liquid one. You cannot eat appreciation, and a depreciation deduction does not pay a roofer. Be extremely cautious about refinancing into a position that produces negative cash flow from day one. You have converted a profitable rehab into a monthly liability with a 30-year term.
Run the same deal with the appraisal in your favour — $330,000 instead of $290,000.
Refi Loan = $330,000 x 0.75 = $247,500 Cash Recouped = $247,500 - $144,000 = $103,500 Refi closing (2%) = ($4,950) Net cash back = $98,550 (95.8% of capital) Capital left in the deal = $4,325 New payment at 6.67% = $1,592.14/mo ($19,105.68/yr) Annual Cash Flow = $20,400.20 - $19,105.68 = $1,294.52 ($107.88/mo) DSCR = $20,400.20 / $19,105.68 = 1.07 Cash-on-Cash = $1,294.52 / $4,325 = 29.93%
Cash-on-cash nearly tripled, from 10.71% to 29.93%. Every other number got worse. Monthly cash flow fell from $300.87 to $107.88 and DSCR fell from 1.22 to 1.07 — below what a lender will write. Leave $500 in and cash-on-cash reads 258.9% on a property that clears $107 a month.
Cash-on-cash is Annual Cash Flow / Total Cash Invested, and as the denominator approaches zero the ratio approaches infinity regardless of what the numerator does. It is a division artefact, not a signal — which is why it ranks last for BRRRR even though it is genuinely useful on a conventional purchase where the denominator is stable. That distinction is covered in cap rate vs cash-on-cash vs IRR.
IRR is the better return metric here because it prices the timing of the refinance and the terminal sale rather than one snapshot year. Be honest about its limit: IRR degrades at the same extreme, which is why CasaWise only displays it between −100% and +500%. DSCR is the metric that never lies about a BRRRR — there is no capital in the denominator at all. Coverage is coverage whether you left $50,000 in the deal or nothing. Underwrite on DSCR and monthly cash flow first, IRR second, cash-on-cash last.
It means you own an asset with none of your money in it. It does not mean the asset is good.
Zero basis is the same thing as maximum leverage. In the $330,000 case you hold a $247,500 loan against $20,400 of NOI at 1.07 coverage, and one vacant month at $2,750 of gross rent costs more than two years of cash flow. There is no equity cushion to refinance into and no capital left to absorb a compressor, a roof, or a two-month turn. An infinite return on $107 a month is a rounding error dressed as an outcome.
The version worth wanting recoups most of your capital and keeps DSCR comfortably above 1.20. Those goals pull against each other — every extra dollar of loan is a dollar recouped and a dollar of coverage lost — and that tension is the actual craft of the strategy.
If you want to analyze a BRRRR deal properly, a BRRRR calculator has to carry all five of these at once — ARV, refinance rate, hold length, stabilised rent and coverage — not just the refinance line.
BRRRR and Fix & Flip modeling sit in the Ultimate AI Investors tier, along with the 70% Rule check in Deal Insights. Tiers are on the pricing page. The full calculation engine — cash flow, cap rate, cash-on-cash, DSCR, IRR, amortisation schedule and three-scenario analysis — is on the free tier and needs no credit card.
The three-scenario engine surfaces break points one through three before you commit, because it re-runs the same deal at worst, base and best instead of asking you to guess one answer. Worst case multiplies vacancy by 1.8, expenses by 1.2 and CapEx by 1.4, and cuts appreciation by 4 points and rent growth by 2. Refinance rates come from live FRED data, not an assumption you typed six months ago. Every threshold is published on the calculations page so you can check the model against your own spreadsheet.
That gives you a range instead of a point estimate — and a BRRRR that only works at the base case is a BRRRR that does not work.
At 75% LTV, every dollar of ARV shortfall costs 75 cents of recouped capital. An 8% miss on a $290,000 ARV cuts the loan from $217,500 to $200,100 and traps roughly $17,000 more of your money. You can accept the trapped capital, bring cash to close, or dispute the appraisal with better comparables. The property itself gets safer — smaller loan, higher DSCR.
Most lenders require 1.20 or better, and below 1.0 the property does not cover its own debt service before any maintenance surprise. The test also sizes your loan: if NOI is $20,400 and the lender demands 1.20, maximum annual debt service is $17,000, which at 7.67% supports about $199,280 rather than the $217,500 you modelled at 75% LTV.
Not automatically. Zero capital left means maximum leverage, which means the thinnest possible DSCR and no cushion for a vacancy or a major repair. A deal returning all your capital while producing $107 a month at 1.07 coverage is fragile. Recouping most of your capital while holding DSCR above 1.20 is the better result.
Cash-on-cash divides annual cash flow by capital invested. When you recoup 95% of your capital the denominator collapses and the ratio explodes — 29.93% on $4,325 left in, 258.9% on $500 — without the property earning a dollar more. The number tracks how little of your money is in the deal, not how good the deal is. Use DSCR and IRR instead.
It is a useful screen, but understand what passing it implies. If purchase price is at or below 70% of ARV minus rehab and you refinance at 75% of ARV, the loan alone exceeds your purchase-plus-rehab basis, so the deal returns nearly all your capital by construction. Most real BRRRRs miss the line and leave capital in. That is not automatically a failure.
All five break points are visible before you commit, if you model the range instead of the point. Run your next BRRRR through worst, base and best and check DSCR at each — start free, no credit card. Knowledge Is Power.