A small 3 bed / 2 bath house in Tyler, Texas, listed at $125,000 a month ago, dropped to $115,000 after one price cut, and contracted at $108,000 after a short negotiation. Carpet, original kitchen, exterior trim rot, an HVAC system on its last summer. The kind of property a BRRRR investor looks at and starts doing math in their head. This post does the math out loud, line by line, and ends with a verdict.
Numbers below describe a realistic composite property in Tyler, Texas, drawn from current Smith County market norms. Lines are illustrative. Nothing here is a forecast, a recommendation, or a guarantee.
The listing
A 1965 brick ranch on the north side of Tyler, in a neighborhood of similar-vintage homes occupied by a mix of long-term owners and renters. 1,300 square feet, 3 bed / 2 bath, single-car garage, on a 0.22-acre lot. Built well, kept poorly. Roof was replaced four years ago. Everything else is original or close to it.
Asking price: $115,000 today, down from $125,000 at listing 31 days ago. The seller is an out-of-state heir who inherited the property eight months back and wants it gone before the next tax bill.
Listing photos show a kitchen with original cabinets, vinyl tile flooring, and a freestanding range from the 90s. Carpet throughout the living areas. The MLS remarks call it "investor opportunity, sold as-is." A drive-by confirms exterior trim rot on two sides, peeling paint on the soffits, and a window AC unit propped in the back bedroom. That last detail says the central HVAC is not pulling its weight.
How the deal got to you: a saved MLS search for Tyler, single-family, 3 bed minimum, under $150,000, more than 21 days on market. Twelve properties match this week. This one has the largest gap between condition and neighborhood: the comps two streets over are selling renovated in the high $180s.
The BRRRR equation, before the numbers
Two parts of the math control whether a BRRRR works:
- All-in cost is every dollar in before the refinance. Purchase, acquisition closing costs, rehab, and the holding costs to get from buy to rent.
- Refi proceeds is what the cash-out refinance gives back. The cap is the appraised value (the ARV) and the lender's loan-to-value ceiling, which for investor cash-out products typically tops out around 70% to 75%.
The difference between the two is capital left in the deal. A textbook clean BRRRR returns all of it. Most 2026 BRRRRs leave some.
The third question, after the capital question, is whether the property still cash flows on the new refinance loan. A BRRRR that recycles capital but loses money every month does not work.
Line 1: Purchase price
Open at $100,000, citing the visible rehab needs, 31 days on market, and the price cut already on the table. Seller counters $112,000. You counter $107,000. Settle at $108,000. The seller has been on market a month, has another property to clear out of probate, and wants the close.
Purchase price: $108,000.
Line 2: Acquisition closing costs
Title, lender origination, appraisal, prorated taxes, recording. On a $108,000 purchase with a hard money or short-term private loan, plan on roughly 3% of purchase price plus a flat lender fee.
Use $3,000.
Line 3: Rehab budget
The scope is cosmetic plus systems. Not a gut.
- Kitchen refresh (paint cabinets, new pulls, countertops, range and dishwasher, sink and faucet): $7,500
- Flooring (pull carpet, refinish hardwood underneath, vinyl plank in kitchen and baths): $5,500
- Paint, interior and exterior: $4,500
- HVAC replacement, 2.5-ton system: $6,500
- Exterior trim repair, soffit work, full exterior caulk and paint touch-up: $3,500
- Bath updates, both bathrooms (vanity, fixtures, toilet, tile patch): $2,500
- Punch list and miscellaneous (outlets, switches, light fixtures, blinds, smoke detectors, landscaping clean): $2,000
Scope total: $32,000.
Add a 10% contingency. Rehabs run over. Always. The contingency exists because no one looked under the kitchen sink before the offer was written.
Rehab budget: $35,000.
Line 4: Holding costs
The seasoning period before most lenders will refinance against a new appraised value is six months from purchase. The rehab itself takes about ten weeks. Plan on five months from close to a finished, rented property, then another month before the refi loan closes.
For five months of carrying:
- Interest on a hard money loan at 11% for $108,000: roughly $5,000 over five months
- Property tax accrual, prorated: $1,300
- Insurance (builder's risk plus landlord transition): $700
- Utilities during rehab: $400
Holding costs: $7,400.
All-in cost
| Line | Number |
|---|---|
| Purchase | $108,000 |
| Acquisition closing | $3,000 |
| Rehab | $35,000 |
| Holding | $7,400 |
| All-in | $153,400 |
That is the basis the refinance has to clear if the goal is to pull all the cash back out.
Line 5: ARV
The hard number in the BRRRR equation. Get it wrong and every conclusion downstream is wrong with it.
Three sold comps inside a half-mile, in the last 90 days, all renovated 3 bed / 2 bath ranches between 1,200 and 1,400 square feet:
- Sold $187,500, 1,280 sqft, renovated kitchen and baths, vinyl plank throughout
- Sold $184,000, 1,310 sqft, refreshed kitchen, original baths, new HVAC
- Sold $192,000, 1,250 sqft, full renovation, new roof and HVAC
Average roughly $144 per square foot. At 1,300 sqft, that suggests an ARV in the $185,000 to $190,000 range for a comparably finished property.
Be conservative. Comps drift, appraisers cherry-pick low, and the lender is going to use a value that backs into the smallest loan they can make.
ARV used for underwriting: $185,000.
The refi constraint
Investor cash-out refinance, 75% loan-to-value on the appraised $185,000. Refi closing costs run about 2% of the new loan.
| Line | Number |
|---|---|
| Appraised value (conservative) | $185,000 |
| Cash-out at 75% LTV | $138,750 |
| Refi closing costs | $2,800 |
| Net refi proceeds | $135,950 |
Capital left in the deal
All-in $153,400 minus net refi proceeds of $135,950 leaves $17,450 in the deal.
That is not the textbook clean BRRRR, but it is meaningfully tighter than the same deal contracted at the $115,000 list. The negotiation moved roughly $7,500 of capital recycling from the leftover column back into the refi. The question now is whether the refinanced property earns its keep.
The cash-flow check on the refi loan
The capital question is half of the BRRRR test. The other half is whether the property cash flows on the new loan after honest expenses.
Refi loan: $138,750 at 7.25%, 30-year amortization. Monthly principal and interest: $946. Annual debt service: $11,352.
Rent underwriting:
Gross scheduled rent. Three rent comps in the same submarket for renovated 3 bed / 2 bath single-families in this size range cluster between $1,575 and $1,725. Use $1,650.
Gross rent: $19,800 a year.
Vacancy. North Tyler tenant turnover is moderate. Use 7%. That removes $1,386. Effective gross income: $18,414.
Property tax. Smith County effective rate runs about 2.2% in this area. Texas reassesses after a sale, and a $35,000 rehab will push the assessed value to or above the new appraised value. Plan on the new bill, not the seller's last bill.
2.2% of $185,000 is $4,070.
Insurance. Landlord policy on a 1965 frame-and-brick rental in East Texas: about $1,500 a year. Lower than the coast, higher than ten years ago.
Property management. Tyler PMs run 9% to 10% of collected rent, plus a half-month leasing fee on turnover. Use 9% of collected. 9% of $18,414 is $1,657 a year.
Count it even if the plan is to self-manage from out of state. Self-management is a job. Subtracting that job from the analysis hides cost, not value.
Maintenance. Service calls, small repairs, year-to-year wear. 7% of collected on a freshly renovated 60-year-old structure: 7% of $18,414 is $1,289 a year.
CapEx reserves. New HVAC, refreshed kitchen, new appliances. The big-ticket items reset on this rehab, but the roof has another decade and a half, the siding will need work eventually, and the water heater is on borrowed time. Reserve 6% of collected: $1,105.
Operating expense total: $4,070 + $1,500 + $1,657 + $1,289 + $1,105 = $9,621.
That is 48.6% of gross rent. In the range an honest operator should expect.
Net operating income: $18,414 − $9,621 = $8,793.
Annual debt service: $11,352.
Cash flow: $8,793 − $11,352 = −$2,559 a year, or about $213 a month out of pocket.
Cash-on-cash return on the $17,450 left in the deal: negative.
The verdict
Pass at $108,000, conventionally financed at current rates.
Could a buyer reach for this deal anyway? Yes. Here are the cases where it pencils, plainly stated.
A lower refi rate. At 6.50% instead of 7.25%, the refi payment drops by about $70 a month and the property is roughly breakeven on cash flow. Anyone with a bank or credit union relationship that can hit that rate is solving a different math problem than what is in front of most investors today.
A sharper purchase. At $95,000 instead of $108,000, the all-in cost falls to about $140,000, the 75% refi at the same $185,000 ARV still returns about $136,000, and the capital left in shrinks to roughly $4,000. The cash-flow math on the same $138,750 refi loan does not change much, so the property is still around breakeven monthly, but with effectively no capital left in, breakeven is the win. Another $13,000 off the purchase is the whole deal here, not a smarter rehab plan.
A better ARV outcome. If the rehab is a step nicer than the budget assumes and the appraisal comes in at $200,000 instead of $185,000, the refi at 75% is $150,000, and capital left in falls to about $6,500. Property tax goes up a touch but the cash-flow math is roughly the same. The fight is at the appraisal.
Stronger rent. Rent at $1,800 instead of $1,650 adds about $1,300 in NOI after expenses, cutting the monthly bleed roughly in half — from $213 to about $104. Not breakeven on the existing refi loan, but close enough that a tighter refi rate finishes the job. The risk is over-projecting market rent on a property finished one tier above the comp set. That is a common BRRRR optimism the next vacancy corrects.
The price it works at
For this property to deliver a clean BRRRR at current rates (roughly all-in covered by the refi, and breakeven-or-better cash flow on the refi loan), the purchase needs to land near $90,000 with the rehab held to $32,000.
Quick check at $90,000 / $30,000 rehab / $185,000 ARV / $1,650 rent / 7.25% rate:
| Line | Number |
|---|---|
| Purchase | $90,000 |
| Acquisition closing | $2,800 |
| Rehab (with contingency) | $33,000 |
| Holding (5 months, smaller loan) | $6,400 |
| All-in | $132,200 |
| Refi at 75% of $185,000 ARV | $138,750 |
| Refi closing | $2,800 |
| Net refi proceeds | $135,950 |
| Capital left in | −$3,750 (i.e., the refi pays you back fully) |
Monthly cash flow at the same $11,352 debt service and $9,621 operating expenses: still around −$213 a month at $1,650 rent, about −$104 a month at $1,800 rent.
A $90,000 contract on a $115,000 list with a probate seller, 31 days in, is not a fantasy. Settling at $108,000 was the deal most investors would have landed on; $90,000 is the deal the BRRRR math actually demanded. The capital-recycling version of this property lives in that $18,000 gap.
Three things this listing teaches
- The refinance ceiling is the design constraint. All-in cost is what the buyer controls. The refinance gives back a fixed percentage of an appraisal the buyer mostly does not control. Underwriting BRRRR backward from a conservative ARV is the only honest direction.
- A clean BRRRR is bought, not rehabbed. A more expensive purchase cannot be rescued by a smarter rehab. The all-in cost has to land below the refi ceiling at acquisition, which means the purchase price does most of the work.
- Capital recycled does not mean money made. The cash-flow check on the refi loan is the second test, and at current rates it is the test more BRRRRs fail. Pulling $135,000 back out of a property that bleeds $200 a month is a financed loss with extra steps.
A word on the workflow
The eleven lines above are the lines every BRRRR investor runs, every time. The math is fast once the inputs are gathered. The inputs are the slow part: rent comps for the renovated condition, three current sold comps for ARV, an honest rehab scope from someone who has held a hammer recently, a holding-cost figure that matches the actual rehab timeline, and the current lender's LTV ceiling and rate. That is the hour of busywork between a listing and a verdict.
Whoof is built to shorten that hour. The verdict still belongs to the investor; the work that gets the investor to the verdict gets shorter.
Run Whoof on a fixer already on your list this week and see how the first pass compares.
Investing in real estate involves risk. The property, prices, rents, taxes, insurance, and rates above are illustrative for a clearly-labeled composite in Tyler, Texas, drawn from current market norms. Refinance LTVs and seasoning periods vary by lender and product. Confirm current terms with a lender before underwriting any specific deal. Nothing in this post is a forecast or a guarantee.
This post is for educational purposes only and is not financial or investment advice. Real estate investing involves risk, including the risk of loss. Always do your own research and run your own numbers before making an offer.
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