The five steps
- Buy below market, usually with cash or a short-term/hard-money loan.
- Rehab to force appreciation — the value comes from the work, not the market.
- Rent to a qualified tenant to establish income.
- Refinance with a conventional cash-out loan, typically capped at 75% of ARV, to repay the short-term financing and recover your capital.
- Repeat with the money you pulled back out.
What the calculator shows
- All-in cost — purchase + rehab + closing + holding costs
- Refinance loan at your chosen LTV of ARV
- Cash recouped at refinance and cash left in the deal
- New mortgage payment and monthly cash flow after refinance
- Cash-on-cash return on whatever cash remains (infinite if that’s zero)
Making the numbers work
The deal succeeds when:
0.75 × ARV ≥ purchase + rehab + closing + holding
That’s essentially the 70% rule with a little more room because you’re refinancing rather than selling. Two disciplines keep you safe:
- Conservative ARV. Get comps from an agent or appraiser, not the seller.
- Rehab contingency. Add 15–20% to the contractor’s bid.
After the refinance
Re-run the property as a standard rental at the new, higher loan balance using the rental ROI calculator. If it only cash-flowed at the old balance, you’ve built a fragile deal.