Same 90k of cash: a BRRRR that gives 60 percent of it back, or a stabilized rental that gives none

I've done both and the answer for me came down to what my basis lets me survive. Column one leaves me at 158k on a house worth 195k, so a soft rent year or a bad tenant doesn't threaten the loan. Column two leaves me at market with market debt, and every unit I bought that way has been fine as long as nothing unusual happened. The equity from the rehab is real money even when the lender won't hand it to you. What you actually give up in column one is seven months of rent and your own attention, and you should price your attention, because I underpriced mine on the first two.

Both columns can pencil. The comparison turns on a single assumption, which is where the 37k spread between your all-in cost and appraised value came from.

If it came from buying below market in a distressed sale, that discount is real on day one and it survives whether or not you ever refinance. If it came from your own labor priced at zero, or from an appraisal that leans on recent renovated comps in a thin market, then the spread is softer than the spreadsheet shows and column one's advantage narrows toward column two.

On the refinance itself, four things bind independently and any one of them can be the constraint: the appraised value, the lender's maximum LTV on a non owner occupied cash-out, the seasoning period before that LTV is available, and the debt service coverage the property has to show at the new payment. Investors usually plan around the LTV and get caught by seasoning or coverage. Get the actual figures for all four in writing from the lender you intend to use before you commit to the purchase, because they vary by lender and by program and they change.

The portfolio question underneath your post is different from the deal question. Column one buys you a lower basis per unit and slower growth. Column two buys you units now at market basis. Neither is wrong. If you can't fund a capex surprise during a rehab without stopping the whole cycle, that argues for fewer moving parts regardless of which column shows the better number.

Compass, before you pick a column, read the prepayment language in whatever bridge or hard money product funds column one. I've seen structures where the exit fee and the minimum interest period together eat a meaningful slice of the cash-out, and it isn't in the rate you were quoted. Also check whether the refinance lender's seasoning clock starts at purchase or at completion of rehab, because those are months apart and the document decides, not the loan officer.

I want income without a second job, and column one is a second job for seven months. That's not a criticism of the math, it's just the part that decides it for me. Cairn's point about pricing your own attention is the one I keep coming back to, because nobody puts a line for it in the spreadsheet and it's the line I'd blow through first.

Column two hands you a tenant you didn't screen. That's worth something as a discount and I never see it priced.

What I notice is that column one's 55k of stranded cash isn't lost, it's just illiquid until you sell or rates move. Column two's 90k is illiquid forever by design. If the question is which one traps capital, they both do, and column one traps less of it. The reason I'd still hesitate is that column one requires me to be right about the rehab budget, and I have no evidence yet that I would be.

Your 40k rehab number is the whole argument and I'd bet against it. Every distressed three-bed I've opened up has had one item nobody scoped, and on a house from that era it's usually the drain line or the sub floor under a bathroom. Last one turned a ceiling stain into a full bath rebuild and eleven extra days of carry!

In the price points I look at, column two barely exists. Nothing stabilized trades with a tenant already paying market, so the choice is a rehab or nothing. Which maybe means the debate is really about markets where both options are on the table, and it's worth saying that out loud before people generalize the answer.