Hard Money Cost on a 6-Month BRRRR —
The Number Every Calculator Skips.

Hard money is not one cost. It is four.

Interest rate. Typically 10–12% APR right now for a non-bank investor loan. Some lenders dip to 9% for repeat borrowers with track records; new operators and weird deals can push toward 13%. Interest accrues monthly on the outstanding balance.

Points. Paid up front at closing, calculated as a percent of the total loan. 2 points is standard. 1 point if your lender likes you. 3 points if you are paying for a fast close or a thin file. Points are pre-paid interest — they hit your cash position day one, and the lender keeps them whether your deal works or not.

Origination and underwriting fees. Flat dollar fees, usually $500 to $2,000 depending on the lender. Some lenders bundle them into points; most add them separately. Always ask up front.

Draw fees. On the rehab portion, your lender does not hand you $45k on day one. They fund it in tranches — typically 3–6 draws across the rehab — each tied to inspected, completed work. Most lenders charge $100–$300 per draw to send an inspector out and release funds. On a 4-draw rehab at $150 per, that is $600 you did not plan for.

None of those four costs show up on a back-of-napkin BRRRR underwrite. All four hit the bank account. (Most of the free tools in this category are mediocre on this exact point — see DealCheck or FlipperForce if you want a feature-by-feature comparison.)

Here is the part almost every free calculator gets wrong even when it tries to model HM cost.

The purchase loan is funded the day you close. If you borrow $108k against the purchase, the lender wires $108k. From that day forward, you accrue interest on the full $108k balance every single month until refinance.

The rehab loan does not work the same way.

If your rehab is $45k, the lender does not write you a check for $45k at closing. The money sits in an escrow-style holdback at the lender, and you pull it down as draws — typically 3 to 6 of them across the rehab — each one requiring the inspector to confirm that the work tied to that draw is done.

Month one of the rehab, you might have $5k drawn. Month three, maybe $25k. Month five, $40k. By the end of month six, the full $45k is out. The average balance over the rehab life is roughly half of the total — call it 50%.

So when you calculate interest on the rehab portion, you do not apply the full 11% × 6 months × $45k. You apply it to roughly $22.5k average outstanding. This is the "50% draw schedule approximation" the BRRRR engine inside VAC uses.

Get this wrong in either direction and your underwrite is off by thousands. Calculators that ignore HM cost entirely overstate your cash-out at refi. Calculators that apply full interest to the rehab loan (treating it like a lump-sum disbursement) overstate your costs and kill deals that would have penciled.

Let me run a typical BRRRR end to end so you can see every line.

Now the HM cost stack:

Purchase loan interest. Full balance accrues for the full term. $108,000 × 11% × (6 / 12) = $5,940.

Rehab loan interest. Average balance over the draw schedule is ~50% of the total. $45,000 × 11% × (6 / 12) × 0.5 = $1,238.

Points. Charged on total loan amount. $153,000 × 2% = $3,060.

Origination + draw fees. $1,000 origination + 3 draws at ~$150 each = $450 in draw fees, plus $50 wire fees. Call it $1,500.

Add them up. Total hard money cost: $11,738.

That $11,738 does not appear anywhere on the BRRRR calculators that just sum purchase + closing + rehab.

Take the same deal and run it two ways.

Without HM cost in the underwrite:$120k purchase + $4k closing + $45k rehab + $3k holding + $5k buffer = $177k all-in. Refi at $235k × 75% = $176,250. The free calculator tells you that is "basically a full BRRRR — $750 stuck." You go buy the house thinking you are getting all your money back.

With real HM cost layered in: $177k from above + $11,738 in hard money cost = $188,738 all-in. Refi at $176,250. You are short by $12,488. That cash is stuck in the deal until you either pay down the refi or refinance again later at higher LTV.

Same deal. Same purchase. Same rehab. One underwrite says full BRRRR. The other says $12k of dead capital. The difference is one line item the free calculators leave out.

This is the single most common way I see operators get into BRRRRs thinking the math works, then end up bag-holding cash. Not because they bought wrong — because they underwrote without the cost of the money they were using to buy.

Once you see the real number, the obvious next question is what you can do about it. Three real levers:

1. Shorten the rehab timeline. Every month you save on the timeline is one-twelfth of your annual HM interest avoided — on both the purchase loan and the rehab loan. On the example above, a 4-month rehab instead of 6 cuts interest from $7,178 to $4,785. That is $2,400 saved on a single lever, and it is the only one you fully control once the loan is closed. This is the entire reason scope-of-work discipline, pre-ordered materials, and a real crew schedule matter — they pay you in interest savings before they pay you in resale price.

2. Negotiate the points down. Points are the single biggest line item in HM cost — $3,060 in the example. One point on a $153k loan is $1,530. If you have done a deal or two with the lender, ask for 1.5 points instead of 2. If they say no, ask if they will eat the origination fee instead. The worst they say is no. Most lenders move on points before they move on rate.

3. Finance less of the rehab with your own cash. If you have $20k sitting idle that is not earning much, financing $25k of the $45k rehab instead of all of it cuts your rehab interest from $1,238 to $688 and saves you 1 point on the $20k you are not financing — another $400. That is $950 in HM cost knocked out by using a chunk of your own cash. The tradeoff is opportunity cost on that $20k while it is parked in the deal — the right way to measure that is cash-on-cash on stuck capital, not headline interest savings.

None of this is an argument against hard money. It is an argument for underwriting it honestly.

On a 6-month flip with $45k of projected profit, $11k in hard money cost is fine. The leverage is doing real work — without it, you would need $165k in cash to do the deal at all. Trading $11k in interest for the ability to recycle your capital across three deals a year instead of one is an obvious win.

On a marginal BRRRR with $5k of projected cash-out and $300/mo of cash flow, $11k in hard money cost can flip the deal from a small win into a real loss. Same operator, same money cost — different deal economics turn the same financing into a wrench or a multiplier.

The whole game is knowing which one you have before you sign the loan docs. That requires the real number, not the back-of-napkin one.

To be specific, here is what I see broken across the free BRRRR tools when I run my own deals through them as a sanity check:

• No HM input fields at all. The most common failure. Calculator just asks for purchase + rehab + ARV and assumes financing cost is zero.
• Flat interest on rehab loan. Treats rehab disbursement like a lump sum. Overstates rehab interest by 2x in most cases. Kills deals that would actually work.
• No points or fees. Even when there is an HM section, points and origination fees frequently get left out entirely. That is $3–5k missed on a typical deal.
• Holding cost is one-shot. Insurance, taxes, and utilities get added once instead of multiplied by rehab months. A $400/mo holding cost should be $2,400 on a 6-month rehab, not $400.
• Refi math is interest-only. Some calculators model the new mortgage as a simple monthly interest payment instead of real 30-year amortization. Cash flow is then overstated because principal payment is missing from the expense side — which it should not be, since principal is part of the monthly check the bank wants.

Every one of those errors moves the "full BRRRR" line a few thousand dollars in your favor. Stack four of them and a deal that loses $15k looks like a winner.

The whole BRRRR thesis hinges on one question: does your all-in cost come in under 75% of ARV? If yes, you recycle capital. If no, you trap it.

Hard money cost is part of your all-in. Always. On a fully-financed BRRRR it is the third-largest line item behind purchase and rehab — bigger than closing costs, bigger than holding costs, bigger than refi closing. Ignoring it is not conservative underwriting. It is wishful thinking.

Build the real number into your underwrite before you close. The deals that pencil after honest HM cost are the deals that actually work. The ones that only pencil with HM cost left out are the ones where you find out 9 months later that the math never made it.