Every week we review BRRRR scenarios from investors who are one spreadsheet away from either recycling capital or trapping it for twelve months of carry. The question is never “Is BRRRR good?” — it is whether this acquisition, this rehab scope, this rent roll, and this refinance lane produce enough spread to justify the risk.
This walkthrough uses a simplified but realistic Midwest duplex so you can mirror the math on your own file. For the full framework, see our master BRRRR strategy guide. For Chicago-specific seasoning and RLTO friction, see the Chicago BRRRR guide.
The deal on paper
| Line item | Amount |
|---|---|
| Purchase price | $185,000 |
| Rehab (full mechanical + cosmetic) | $62,000 |
| Closing + carry (6 months) | $18,000 |
| All-in | $265,000 |
| Stabilized gross rent | $2,350/mo |
| Target appraised value | $285,000 |
Acquisition is distressed: both sides vacant, panel and HVAC at end of life, kitchens from 1998. The sponsor plans hard money for buy + rehab, then DSCR cash-out once leased.
Step 1 — Buy: does basis leave room?
Rule of thumb: you need 15%+ equity spread after rehab for a DSCR exit to return meaningful capital. Here, all-in $265K vs. $285K ARV is only 7.5% — thin.
Verdict: Negotiate purchase to $170K or trim rehab to $50K with scope discipline. Without that, the refi likely leaves too much cash trapped.
Step 2 — Rehab: can draws match the schedule?
Hard money releases rehab in draws tied to inspections. Budget line items:
- Electrical panel + partial rewire: $12K
- HVAC (two systems): $14K
- Kitchens/baths (both units): $22K
- Flooring, paint, exterior: $14K
If your contractor wants 50% upfront, you float payroll between draws — model $8K–$12K liquidity beyond the holdback.
Step 3 — Rent: will a DSCR lender believe the roll?
$2,350/mo gross on a renovated duplex is credible if you show executed leases and comps within a half-mile. Underwrite:
- 7% vacancy → $2,185/mo effective gross
- Taxes $3,600/yr, insurance $1,800/yr, maintenance 8% → stressed NOI near $1,450/mo
At a $285K value, DSCR at 75% LTV = $213,750 loan. Monthly P&I near $1,420 at 7.5% / 30yr → DSCR ~1.02 — borderline.
Verdict: Either push ARV to $300K+ with stronger comps or accept a partial BRRRR that leaves $30K–$40K in the deal.
Step 4 — Refinance: seasoning and documentation
Many DSCR programs require 3–6 months from acquisition unless you document heavy rehab. Package:
- Before/after photos
- Paid contractor invoices >25% of purchase price
- New leases dated after certificate of occupancy
- Appraisal with condition adjustment narrative
Missing any one item can push you into conventional 12-month seasoning — killing BRRRR velocity.
Step 5 — Repeat: what capital comes back?
If refi proceeds pay off $240K hard money (acquisition + partial rehab drawn), you might extract $0–$15K cash on this thin file. A good BRRRR returns 80%+ of cash invested. This deal, as written, is a learning deal — not a capital recycler.
Red flags that kill BRRRR deals
- ARV optimism without three sold comps in the same school district
- Rehab scope creep without change-order discipline
- Pro forma rent with no lease or market study
- Ignoring taxes — reassessment after rehab can erase NOI gains
- Wrong exit product — trying conventional cash-out on a non-owner-occupied duplex still in rehab
Green lights that suggest a good move
- All-in cost ≥15% below conservative ARV
- Rehab timeline ≤6 months with permit path confirmed
- Gross rent supports 1.15+ DSCR at your target LTV
- Hard money terms include 100% rehab holdback with draw schedule you can hit
- You have 6 months carry in reserves beyond closing
Submit your scenario
Want a second set of eyes? Find your loan match in minutes or call (833) 264-7776. We underwrite BRRRR files daily — purchase, rehab, and DSCR exit in one conversation.
Rates, terms and conditions offered only to qualified borrowers and are subject to change at any time without notice. Closing times are in business days and commence upon receipt of appraisal payment and satisfaction of borrower conditions. Closing times may be delayed due to appraiser property access . All loans are subject to full underwriting for loan approvals. Jaken Finance Group only finances non-owner occupied investment properties.
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