BRRRR Refinance: LTV Limits & Cash Left In

The appraisal is only one constraint

Multiplying a $240,000 after-repair value by 75% LTV gives a $180,000 value-based ceiling. If the property's income supports only $170,000 under the assumed financing terms, use the smaller modeled amount. This is a planning comparison, not a lender commitment.

Actual proceeds can also be restricted by seasoning rules, eligible costs, appraisal results, cash-out limits and lender reserves. Treat an estimated after-repair value as an assumption to verify, not an established value.

Calculate cash returned and cash still invested

Suppose the acquisition and rehab cost $180,000, funded with $140,000 debt and $40,000 cash. A $170,000 refinance less the $140,000 payoff and $5,000 refinance costs returns $25,000. That leaves $15,000 of the original cash invested.

Additional cash-funded carrying costs or repairs would increase the remaining cash basis. If payoff and refinance costs exceed the new loan, closing may require more cash instead of returning cash. A zero or negative cash basis makes a simple cash-on-cash percentage unhelpful; report the dollar cash flow and risks instead.

Test the permanent loan, not just the rehab

A project may look attractive during renovation yet struggle after refinancing. Recalculate the ongoing payment and reserves using the permanent loan terms.

• Lower the final appraisal and stabilized rent separately.
• Increase rehab costs and time to occupancy.
• Check the refinance rate, costs and required reserves directly with the lender.