The BRRRR Math Investors Keep Getting Wrong

[James Jones]

Every time BRRRR comes up, someone says they "pulled all their money out" or "got a free house." But when you actually look at the numbers, most investors aren't running the math correctly, and that misunderstanding is why a lot of people get stuck, overpay, or get burned on the refinance.

If you want to scale using BRRRR in 2025, here's the math you must get right.

1. ARV Doesn't Matter Until the Rehab Is Realistic

Too many investors reverse-engineer their deal:

ARV × 75 percent = "My max offer."

Then they plug in a rehab number that magically makes the deal look good.

The problem?

They forget that:

ARV is based on true comps, not hope.

Rehab costs in 2025 are still elevated.

Time delays destroy cash flow and equity.

Holding costs push your all-in number higher than you think.

If your rehab estimate is off, your entire BRRRR collapses.

2. "All In for 75 Percent ARV" Isn't Enough

Even if you hit the famous BRRRR formula (All-In = 75 percent ARV), you're not getting all your cash back.

Here’s why:

Closing costs on the purchase

Closing costs on the refi

Points and lender fees

Interest during rehab

Carrying utilities, taxes, insurance

Rehab draws and inspection fees

Time delays that push interest higher

These aren’t optional. They’re built-in costs.

Yet most investors don’t include them in their “all-in” numbers.

When you add everything, you're usually 80 to 85 percent ARV, even when you think the deal was tight.

3. Cash Back at Refi ≠ Profit

This one traps beginners.

You pull $30,000 out at the refinance, and suddenly you think you “made” $30,000.

You didn’t.

That’s debt.

You borrowed it.

The only reason BRRRR works is because:

The asset produces cash flow.

The long-term tenant pays down the loan.

The equity buffer protects you from downside.

You’re leveraging debt into a cash-flowing asset.

Not printing money.

4. Cash Flow Gets Ignored

Investors are obsessing over the equity pullout, not the long-term performance.

Here’s the truth that separates pros from hype:

If the property doesn’t cash flow after the refi, it’s a liability.

Cash flow is what pays the mortgage, not equity.

Debt service in 2025 is too high to ignore.

A BRRRR that produces zero or negative cash flow is not a BRRRR, it's a flip gone wrong.

5. Appraisals Don’t Care About Your Rehab Budget

New investors think:

“I put $60K into the rehab, so the appraiser should see the value.”

Not really.

Appraisers look at:

Sold comps

Condition

Layout

Location

Square footage

Bedroom count

Market demand

They don’t care whether you spent $20K or $120K.

They care whether the finished product matches neighborhood values.

If your scope of work doesn't align with the area, your ARV is fantasy.

6. The Only BRRRR Math That Matters

Forget the hype formulas.

Here are the real numbers:

Total Cost:

Purchase

Rehab

Holding Costs

Interest

Points

Closing Fees

Time Delay Cost

= True All-In Number

Refi Value:

(ARV × 75 percent LTV)

= Max Refi Loan Amount

Refi Loan – True All-In = Cash Left in or Cash Pulled Out

Then ask:

Does it cash flow at today’s interest rates?

Is DSCR at least 1.2 or higher?

Will the tenant pool support long-term occupancy?

Does the neighborhood support the ARV you're banking on?

That’s the math that scales portfolios.

That’s the math pros use.

Final Thought

BRRRR isn't dead.

It’s just not the fantasy version people pitch online.

The investors who win in 2025 are the ones who:

Know their real numbers

Budget realistically

Underwrite conservatively

Choose cash flow over ego

Don’t force the deal

Understand debt vs. profit

If you’re trying to build a portfolio that lasts, it’s not about getting a “free house.”

It’s about owning a profitable, stabilized, cash-flowing asset that will pay you for decades.

If you want, I can also create:

A short punchy version

A story-driven version

A version framed specifically around Section 8 BRRRR deals