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Understanding The BRRRR Calculator

The main purpose of using this BRRRR Calculator is to make sure that before you buy and renovate a distressed property, the financials of the project allow you to:

1. Refinance the entire cost of the purchase and rehab into a low rate DSCR loan upon project completion.
2. To make sure that the property has a debt service coverage ratio (DSCR) greater than 1.0 (i.e. the property is cash flowing upon refinancing).

The calculations are broken down into two sections: Purchase + Rehab and Rent + Refinance.

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Purchase + Rehab Calculations For the BRRRR Strategy

The calculations in this section are to determine the costs associated with buying and rehabbing the property.

Total Project Cost (Purchase + Rehab) =  Purchase Price + Rehab Expenses + Monthly Loan Payments + Loan Origination Fees + Monthly Taxes & Insurance + Miscellaneous Closing Costs

As a rule of thumb, the Total Project Cost (Purchase + Rehab) should not exceed 75% of the after repair value.

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Rent + Refinance Calculations For the BRRRR Strategy

The calculations in this section are to verify that the project will cashflow up refinancing and to verify that the refinance loan amount will be greater than the Total Project Cost (Purchase + Rehab).

‍DSCR = Monthly Rent / (Monthly Loan Payment + Taxes + Insurance)

Net Proceeds = Refinance Loan Amount - Refinance Loan Origination Fees - Total Project Cost (Purchase + Rehab)

To satisfy the BRRRR Strategy, the net proceeds must be greater than 0 and the DSCR must be greater than 1.

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BRRRR Financing

The are two loans you will need to secure in order to execute the BRRRR investment strategy:

1. Hard Money Loan: This is a short term (12 Month) interest only loan used to acquire and renovate properties in distressed condition. A hard money loan will consist of an initial advance paid at closing and a rehab holdback component paid out as rehab is completed on the property. Ridge Street Capital’s Hard Money Loans consist of an initial advance of 75%-90% of the purchase price and a 100% rehab holdback. As of July 2024, interest rates on hard money loans are between 10.00%-11.99% depending on the borrower’s experience and the project LTVs.
   
   You can learn more about the Loan Terms for Ridge Street’s Hard Money Loans here. You can also get pre-approved for your next project or apply for financing on an active deal.
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2. DSCR Refinance Loan: The debt service coverage ratio loan (DSCR) bases the refinancing loan amount on the monthly cashflow of the property. Upon refinancing, your property must have a DSCR greater than 1. Make sure to use the BRRRR Calculator to check the expected DSCR of your property before beginning the project.
   
   Ridge Street Capital is a top DSCR lender in 35 States across the US. If you are a BRRRR Strategy investor you can apply, get pre-approved, or schedule a call to learn more about how to secure industry leading DSCR loans for your projects.

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BRRRR Case Study

Ridge Street Capital works with BRRRR Real Estate Investors across 35 States every day. Below is a case study of a BRRRR Real Estate Investment that one of our clients made in July of 2024 on a project that we financed. The case study goes through the full deal scenario, the loan metrics, and specifics on how we evaluated the project.

View Full BRRRR Strategy Case Study

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In Which States Can You Find Properties For The BRRRR Strategy

The BRRRR strategy works best in states where the rent-to-property value ratio is high. This means investors can acquire properties at a relatively low cost while generating strong rental income—key factors in maximizing cash flow and refinancing potential.

States with affordable housing markets and strong long term rental demand, such as Ohio, Indiana, Pennsylvania, and Maryland, are often prime BRRRR locations.

However, higher-cost markets can also work for BRRRR—especially when utilizing short-term rentals. In states like Florida, Tennessee, North Carolina, and Colorado, Airbnb and vacation rental markets allow investors to generate significantly higher rental income than traditional long-term leases. Cities with strong tourism, such as Nashville or Denver, can provide exceptional returns, making them viable for BRRRR.

Ultimately, the best states for BRRRR depend on the balance between acquisition costs, rental income, and financing options.

If you’re considering becoming a long distance landlord for a rental property, you might also be asking, “What do I need to know before managing a rental property out of state?” Here’s an article we wrote with Redfin.com on what to know before taking the plunge into long-distance real estate investments: Managing a Rental Property Out of State.