Track Total Capital Through Renovation
BRRRR projects consume capital at different stages. Purchase equity, acquisition fees, renovation payments, contingency, loan interest, taxes, insurance and leasing costs all belong in the investor’s cash plan. A loan may cover part of these costs, but reimbursement draws and excluded expenses create additional timing needs.
Maintain two schedules: an economic cost budget and a cash funding timeline. The cost budget measures the total investment; the cash timeline shows when equity is contributed, debt is advanced and reimbursements arrive. Do not count a contractor expense twice simply because it is first paid from cash and later reimbursed. Instead, record the expense once and track the funding sources separately.
Protect a reserve for lease-up and permanent financing. The rehab project’s apparent completion does not immediately produce rent or a refinance closing. If a tenant moves in late or an appraisal is delayed, interim payments continue. Keep construction contingency distinct from operating reserves; a reserve already spent on a roof cannot also cover vacancy. Evaluate whether your available cash can support a delayed project without relying on the next acquisition. A repeatable BRRRR strategy depends on transparent capital accounting and enough liquidity to survive a less favorable first cycle.
Worked example
Purchase is $180,000, rehab $40,000 and total fees/carry $15,000: cost basis is $235,000. Debt funds $190,000 of these costs, so equity contributed is $45,000. A $10,000 reserve held outside the project increases liquidity required to $55,000; it is not an expense until actually used.
Mini glossary
- Cost basis
- Investment cost under the stated accounting assumptions.
- Equity contribution
- Investor funds supporting project costs.
- Working capital
- Cash available to meet near-term operating needs.
Put it into practice
Create one project cost ledger and one dated cash timeline. Reconcile funded costs, debt and equity to avoid double-counting reimbursements. Reserve enough cash for a delayed lease-up and refinance. Identify whether any planned cash is borrowed or already committed to another property.
Recommended reading
Use these primary sources for context. Individual lender requirements can change; confirm the current program for your transaction.