Flip or BRRRR? How to Compare Both Exits on the Same House

Flip vs BRRRR is not a choice between two houses; it is a choice between two exits on the same house. Buy, rehab and hold are identical. Then either you sell, and the measure is profit, or you refinance against the after-repair value and rent, and the measures are cash left in the deal, cash flow and DSCR. On the example house the flip yields $35,000 in about six months; the BRRRR leaves $30,600 in the deal and, at $2,400 rent, a cash flow of about −$192 a month.

What is the difference between fix and flip and BRRRR?

ARV (after-repair value) is what the house is worth once the work is done. Both exits are measured against it, but in different ways.

A flip sells at the ARV. Every cost is subtracted from the sale price, and what is left is profit. The cash comes back in one lump, usually in months.

A BRRRR (buy, rehab, rent, refinance, repeat) keeps the house. A lender appraises it at the ARV, lends a share of that value (75% is the app's default), and the new loan pays off whatever you borrowed to buy and returns cash. What did not come back is the cash left in the deal. A tenant then pays rent against the new payment and the running costs.

Flip:   Profit = ARV − Price − (Rehab + Contingency) − Purchase costs − Financing − Holding − Selling
BRRRR:  New loan  = ARV × LTV
        Cash out  = New loan − Refinance costs − Purchase loan
        Cash left = Cash invested − Cash out

Fix and flip vs buy and hold is usually argued in the abstract. It is clearer with one house and both sets of arithmetic.

The example house as a flip

1,600 sq ft, 3 bed 2 bath, built 1978. Bought for cash at $200,000, $48,000 of repairs, ARV $320,000, six months from closing to sale. These are example figures, not market data; your market sets its own.

In six months the investor has the $265,800 back plus $35,000, and no house. With hard money the profit drops to $17,900 (points and interest of $17,100) but the cash at closing drops to about $24,560; how much it costs to flip a house has both columns.

The example house as a BRRRR

Same purchase, same rehab, same six months. Instead of a buyer there is an appraisal, a new loan and a tenant. The app's defaults: refinance at 75% of ARV, 7% a year, 30 years, refinance costs 2% of the new loan.

Cash invested = 200,000 + 52,800 + 4,000 + 9,000 = 265,800
Cash out      = 240,000 − 4,800 − 0 = 235,200
Cash left     = 265,800 − 235,200 = 30,600

No selling costs, because nothing is sold. In their place: refinance costs, and $30,600 that stays in the house for as long as you own it. There is no profit line; there is $80,000 of equity on paper and a monthly result, which is the next table.

Cash flow and DSCR at $2,400 rent

The refinance decides how much cash stays in. The rent decides whether the house carries itself every month after that. The app's default running costs, as shares of rent, are vacancy 5%, management 8%, maintenance 5%, capital reserves 5%; property tax 1.1% of the value a year and insurance $1,800 a year unless you enter the real figures.

NOI       = 2,400 − 120 − 192 − 120 − 120 − 293.33 − 150 = 1,404.67
Cash flow = 1,404.67 − 1,596.73 = −192.06
DSCR      = 1,404.67 ÷ 1,596.73 = 0.88

The payment is a standard 30-year amortized payment; the BRRRR calculator article shows the formula and what a point of rate does to it.

So at $2,400 the example house does not cover its new payment with the default costs: about $192 a month short, with a DSCR of 0.88 where many rental lenders want about 1.2. That is not a verdict on the house. It is the figure, and it says which inputs matter: $2,700 of rent, a lower LTV, real tax and insurance figures lower than the defaults, or self-management would each move it. The rental property quick check article runs the same house at several rents.

What each exit depends on

The two readings rest on different unknowns, and that is the real comparison.

The flip depends on one sale price. The ARV is an estimate from comps; the sale is one buyer on one day. If the market softens 5% between purchase and listing, the profit falls by $16,000 plus the change in selling costs, to $19,960. The holding months and the rehab are the other two variables, and they are the same for both exits.

The BRRRR depends on an appraisal and a rent. The appraiser, not a buyer, sets the value, and a 5% lower appraisal means a $228,000 loan instead of $240,000: $11,760 less back after the 2% refinance costs, so $42,360 left in the deal. The rent then has to hold every month for years, against vacancies, a roof in year eight and an interest rate the lender sets at the refinance. A BRRRR also needs the lender to accept the refinance at all; a seasoning period of six months or more of ownership is common.

Both depend on the rehab and the months. A $63,360 rehab instead of $52,800 costs the flip $10,560 of profit and leaves the BRRRR with $41,160 in the deal. Three extra months cost each exit $4,500 of holding.

The flip's risk is concentrated in one event. The BRRRR's is spread over years and includes a second lender. Which you prefer is a question about your cash, your market and your patience, not about which strategy is "better".

Taxes, time and the rest

A flip held under a year is generally taxed as ordinary income, and frequent flipping can be treated as a business with its own tax consequences; a rental is held for years, has depreciation and a different treatment at sale, and a refinance is not a sale. Which of those applies to you, and whether holding a rental in your state and your situation makes sense, is a question for a licensed tax professional and an attorney, not for an article or an app. The time side is simpler to state: a flip ends; a rental has a tenant, repairs and a lender every month, and the $30,600 left in the deal is not available for the next house until you refinance again or sell.

How Flip Investor OS shows both exits side by side

In Flip Investor OS a deal has one set of inputs (price, ARV, rehab, contingency, closing, holding, financing) plus, for the rental side, a rent and the refinance terms. From those it shows Two ways out on the same card: the flip's maximum offer, profit and return next to the BRRRR's maximum offer, cash left in the deal and cash flow. Tapping one chooses it as the deal's exit; the other reading stays visible.

The two maximum offers are different numbers, because they answer different questions. The flip's is the highest price at which the profit still meets your target (10% of ARV by default). The BRRRR's is the highest price at which the cash left stays within your target (the default is nothing left in the deal), and on the example house with the defaults that is $170,000: $240,000 of new loan, less $4,800 of refinance costs, less $52,800 of rehab and $9,000 of holding, is $173,400, divided by 1.02 for the 2% closing costs on the price. Rent does not move that offer, but the app will not show it without a rent, because an offer with no rent behind it would hide whether the house carries its payment.

"BRRRR at this price" lays the whole chain out in ten lines, from the cash invested to the cash flow and DSCR, and if the rent, the ARV or the rehab is missing it says "Needs N more inputs" instead of printing $0. The stress tests run on both exits: appraisal −5%, rehab +20%, three more months, rent −10%, rate +1%, all together. The deal score describes margin of safety and data quality with neutral labels for each exit, and it never says which one to pick. Both the flip profit and the BRRRR calculators are free without a card if you want to run your own house through both.

Once the house is bought, the project keeps the chosen exit: a flip ends with a sale screen and a BRRRR with a refinance screen, where the appraisal, the new loan, the real payment and the real rent are recorded against the plan, and the project is shown as held rather than sold.