How BRRRR changes the denominator
BRRRR (Buy, Rehab, Rent, Refinance, Repeat) aims to pull most or all of invested capital back out in the refinance. If you buy a distressed property for $80,000, spend $40,000 on rehab, then refinance at 75% loan-to-value on a $180,000 ARV and receive $135,000, you may recover most or all of your $120,000 invested. The remaining cash in the deal can be tiny — making cash-on-cash very high or mathematically undefined.
What the metric misses
A near-zero denominator produces a spectacular-looking return, but it doesn't mean zero risk. You've replaced equity with debt: the refinanced loan carries a higher payment that must be serviced through vacancy, repairs, and market cycles. The property's ability to generate positive cash flow after the new loan payment is what actually matters.
Better metrics after a BRRRR refi
Focus on absolute monthly cash flow after the refi payment, debt service coverage ratio (DSCR = NOI ÷ annual debt service; aim for 1.2 or higher), and equity cushion above the loan balance. Cash-on-cash return becomes meaningful again once you've owned the refi'd property long enough to normalize expenses.
Frequently asked questions
Can cash-on-cash return be infinite on a BRRRR?
Mathematically yes, if all your cash is recovered. But that doesn't eliminate risk — you've swapped equity for higher leverage and need the property to cover the new loan.
Is a higher cash-on-cash always better on BRRRR?
Not necessarily — very high cash-on-cash after a refi can mask thin margins and high leverage risk.
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.