Cash left in the deal: the BRRRR formula

The short answer

Cash left in the deal is the cash that is still tied up in the property after the refinance.

Cash left in the deal = cash invested − cash back at the refinance

Each side has its own calculation.

Cash invested is the cash required to acquire, rehab, and carry the property, minus the acquisition loan.

Cash back at the refinance is the new refinance loan minus the acquisition loan payoff and the refinance closing costs.

If cash invested is $49,893.75 and cash back is $34,250, cash left is $15,643.75. The deal recycled most of the capital, but not all of it.

That is the entire relationship. The difficulty is in deciding what belongs on each side and in avoiding the assumption that the refinance will return whatever the pro forma says.

Step 1: Build cash invested

Cash invested is not the purchase price. It is the cash that leaves the investor’s pocket before and during the hold.

Start with the project cost:

Project cost = purchase price + purchase closing costs + rehab with contingency

Then add the financing and carry costs:

• Acquisition points
• Other acquisition fees
• Hold interest
• Property taxes, insurance, HOA, utilities, and other carrying costs during the hold
• Any extra monthly holding costs

Then subtract the acquisition loan:

Cash invested = project cost − acquisition loan + points + other fees + hold interest + holding costs

The acquisition loan is subtracted because it is someone else’s money, not the investor’s cash. Including the loan proceeds as cash invested and then subtracting the loan would be double counting.

Why the contingency is usually cash

The acquisition loan is often based on the purchase price plus the rehab budget. The contingency is usually not financed. If the rehab budget is $35,000 and the contingency is 10%, the rehab with contingency is $38,500, but the loan is based on $35,000.

That means the extra $3,500 is cash invested. It is not a rounding error. Contingency is one of the costs that makes a deal pass the 75% rule and still leave cash in the property.

Why hold interest belongs in cash invested

A short-term acquisition loan charges interest during the hold. If the loan is $157,250 at 11% for six months, the hold interest is:

$157,250 × 0.11 × 6 ÷ 12 = $8,648.75

That interest is paid in cash. It is not part of the purchase price, and it is not part of the rehab budget, but it has to be recovered at the refinance before the investor is made whole on cash.

Why carrying costs belong in cash invested

The property still has taxes, insurance, utilities, HOA dues, and other costs during the rehab and lease-up. Those costs are real cash outlays even if the property is not producing rent yet.

The calculator builds monthly carry from the annual tax and insurance inputs, monthly HOA, utilities, other monthly expenses, and any extra monthly holding cost. It multiplies that monthly carry by the rehab months plus lease-up months.

Default example: cash invested

Using the calculator’s default assumptions:

• Purchase price: $150,000
• Purchase closing costs: $4,000
• Rehab budget: $35,000
• Contingency: 10% ($3,500)
• Rehab with contingency: $38,500
• Project cost: $192,500
• Acquisition loan at 85% LTC: $157,250
• Points at 2%: $3,145
• Hold interest at 11% for 6 months: $8,648.75
• Holding costs for 6 months: $2,850
• Cash invested: $49,893.75

The formula is:

$192,500 − $157,250 + $3,145 + $0 + $8,648.75 + $2,850 = $49,893.75

That is the denominator for capital recycled and the starting point for cash left.

Step 2: Calculate cash back at the refinance

The refinance loan is based on the property’s appraised value, not on the cash invested.

Refinance loan = ARV × refinance LTV

If the ARV is $260,000 and the refinance LTV is 75%, the new loan is $195,000.

The new loan does not all go to the investor. It first pays off the acquisition loan and the refinance closing costs:

Cash back = refinance loan − acquisition payoff − refinance costs

With a $157,250 acquisition payoff and $3,500 of refinance costs:

$195,000 − $157,250 − $3,500 = $34,250

That is the cash returned to the investor at the refinance closing.

If the refinance loan is smaller than the payoff plus costs, cash back is negative. That means the investor has to bring cash to the refinance closing. It is not a failed deal automatically, but it is a liquidity event that needs to be planned.

Step 3: Subtract cash back from cash invested

Now the headline number:

Cash left in the deal = cash invested − cash back

$49,893.75 − $34,250 = $15,643.75

The deal left $15,643.75 in the property after the refinance.

The related percentage is capital recycled:

Capital recycled = cash back ÷ cash invested × 100

$34,250 ÷ $49,893.75 × 100 = 68.65%

The deal recycled about two-thirds of the cash invested. It did not recycle all of it.

A capital-recycled result above 100% means the refinance returned more than the original cash invested. A result below 100% means some cash remains in the deal. Neither result is automatically good or bad. They describe different capital positions.

What cash left is not

Cash left is a cash measure, not a profit measure. It is easy to make it say something it does not.

• It is not profit. The investor still owns the property and still owes the refinance loan. Cash back is borrowed money, not sale proceeds.
• It is not net worth. The refinance changes the loan balance and the equity position. A cash-out refinance can increase liquidity while reducing equity.
• It is not cash flow. Cash left is a one-time refinance result. Cash flow is the annual or monthly income after operating expenses and debt service.
• It is not after-tax. The calculator does not model income taxes, depreciation, or the tax treatment of refinance proceeds.
• It is not a sale result. It excludes selling costs, capital-gains taxes, and appreciation realized at a sale.
• It is not a measure of the property’s quality. A property can leave cash in the deal and still be a strong long-term hold. Another can return all the cash and still be a poor investment.

The useful question is not “did it recycle 100%?” It is “how much capital is left, what return does that capital earn, and can I afford to leave it there?”

Reverse solve: the ARV needed to recycle

If the goal is to recover all of the cash invested, the ARV has to be high enough to support a refinance loan that covers the cash invested, the acquisition payoff, and the refinance costs.

ARV needed = (cash invested + acquisition payoff + refinance costs − target cash left) ÷ refinance LTV

For the default deal, with a target cash left of zero:

($49,893.75 + $157,250 + $3,500) ÷ 0.75 = $280,858.33

The property would need an ARV of about $280,858 to return all of the cash invested at a 75% LTV. That is roughly 8% above the $260,000 base case.

This is the number the 75% rule does not show. The purchase price plus rehab is $185,000, or 71.2% of the $260,000 ARV. The deal passes the screen. But the screen does not recover the closing costs, contingency, points, hold interest, carrying costs, or refinance costs.

The reverse solve makes the gap explicit: at the current assumptions, the ARV has to be substantially higher than the purchase-plus-rehab screen implies.

Reverse solve: the purchase price for a target cash left

A lower purchase price reduces the cash invested. It also reduces the acquisition loan, which reduces the payoff at the refinance. The net effect is not obvious, which is why the calculator solves the full equation instead of applying a simple rule of thumb.

The default deal’s maximum purchase price for a target cash left of zero is about $135,294, holding the rehab, ARV, loan terms, rents, and refinance terms constant. At that price, the cash invested and the cash back roughly offset.

The exact solve includes points and hold interest on the acquisition loan. A simplified version is:

Price = [target cash left − closing costs − rehab with contingency − other fees − holding costs − refinance costs + refinance loan − LTC × rehab budget × fee rate] ÷ [1 + LTC × fee rate]

Where fee rate = points rate + acquisition rate × hold months ÷ 12. The holding cost term excludes hold interest because hold interest is already in the fee rate.

That looks like a lot of algebra, but the logic is simple: the calculator is looking for the price where the cash-left equation equals the target. It is not guessing, and it is not using the 75% rule.

Reverse solve: rent for a target DSCR or cash-on-cash return

The refinance lender cares about DSCR. The investor may also care about the cash-on-cash return on the cash left in the deal. Both can be solved for rent.

Rent for target DSCR = (annual refinance debt service × target DSCR + fixed annual expenses) ÷ (1 − vacancy rate − percentage expense rate) ÷ 12 − other monthly income

At the default 1.25 target DSCR, the rent needed is about $2,705 per month. The current rent is $2,750, so the deal has a small cushion.

Rent for target CoC = (cash left × target CoC + annual refinance debt service + fixed annual expenses) ÷ (1 − vacancy rate − percentage expense rate) ÷ 12 − other monthly income

At an 8% target cash-on-cash return on the cash left, the rent needed is about $2,426 per month. The current rent clears that target.

The two numbers answer different questions. The DSCR solve is about lender coverage. The CoC solve is about the investor’s return on the remaining equity. A deal can satisfy one and fail the other.

Reverse solve: the refinance rate for a target DSCR

The refinance rate is a major lever. A higher rate raises debt service, lowers cash flow, and lowers DSCR.

The calculator solves for the highest refinance rate that still meets the target DSCR, holding the loan amount and term constant. For the default deal, the maximum refinance rate at a 1.25 DSCR is about 6.96%. The base case uses 6.75%, so there is only a small rate cushion.

That does not mean the lender will approve 6.96%. It means that, under the model’s assumptions, a higher rate would push DSCR below the target. The actual rate depends on the market, the lender, the borrower, and the property.

Stress the ARV, because the appraisal is not a promise

The ARV is the assumption that drives the refinance loan. The calculator’s stress table changes only the ARV:

• 10% lower ARV ($234,000): cash left rises to about $35,144; DSCR rises to about 1.42 because the smaller loan has lower debt service.
• 5% lower ARV ($247,000): cash left rises to about $25,394.
• Base case ($260,000): cash left is about $15,644; DSCR is about 1.28.
• 5% higher ARV ($273,000): cash left falls to about $5,894.
• 10% higher ARV ($286,000): cash left becomes about negative $3,856; DSCR falls to about 1.16 because the larger loan has higher debt service.

The lower-ARV cases leave more cash in the deal but improve DSCR. The higher-ARV cases return more cash but reduce coverage. That trade-off is the reason a BRRRR underwrite needs both a cash test and a DSCR test.

The stress table does not vary rent, expenses, hold time, or the refinance rate at the same time. A real downside case might include a lower ARV, a longer hold, and a higher rate together.

Common mistakes

Counting the acquisition loan as cash invested

The acquisition loan is not the investor’s cash. Cash invested is the cash out of pocket after subtracting the loan. If the loan is added to cash invested and then subtracted again, the result is wrong.

Forgetting the contingency

The contingency is usually cash and is usually not financed. A 10% contingency on a $35,000 rehab is $3,500. It belongs in cash invested and in the cash-left equation.

Forgetting points, hold interest, and carrying costs

These are real cash outlays. A deal that ignores them can look fully recycled when it is not.

Forgetting refinance costs

The refinance loan has to pay off the acquisition loan and the refinance closing costs before any cash comes back. The calculator includes refinance costs as a cash use.

Treating cash back as profit

Cash back is borrowed money. The property still has a larger loan. A cash-out refinance can improve liquidity and still reduce equity.

Using an unsupported ARV

The ARV should be supported by closed comparables and a realistic scope of work. A pro forma ARV is an assumption. The stress table exists because appraisals disagree with assumptions.

Stopping at the 75% rule

The 75% rule is a screen. It does not include the costs that determine cash left. Use it to filter deals, not to conclude that a deal recycles capital.

Comparing the wrong cash-on-cash return

Cash-on-cash on the original cash invested and cash-on-cash on the cash left in the deal are different measures. The first describes the original investment. The second describes the return on the equity that remains after the refinance.

How to use the calculator

1. Enter the purchase price, closing costs, rehab budget, contingency, and hold months.
2. Enter the acquisition loan terms: LTC, rate, points, other fees, and any extra monthly holding costs.
3. Enter the rent, vacancy, operating expenses, and reserves.
4. Enter the ARV, refinance LTV, rate, term, and refinance costs.
5. Set a target cash left, target cash-on-cash return, and target DSCR.
6. Read the cash-left headline, capital recycled, post-refi cash flow, DSCR, and reverse solves.
7. Change the ARV by −10% and +10%, then change the hold period and refinance rate. If the deal only works in the base case, it is not a deal yet.

The BRRRR calculator runs all of those cases in the browser. The BRRRR method guide covers the strategy and the failure modes. The methodology page documents the formulas and limits.

Bottom line

Cash left in the deal is a simple subtraction with a lot of assumptions behind it. Build cash invested correctly, calculate cash back after the payoff and refinance costs, and subtract.

Then test the result. A BRRRR is not made safe by a single ARV or a 75% screen. It is made safer by knowing how much cash stays in the property, what return that cash earns, and what happens if the appraisal, the rent, or the refinance rate disappoints.