What refinance rate belongs in the exit underwriting on a BRRRR deal

Before you pick a number, look at what the exit lender's commitment actually promises. Most commitments bind the lender to a program and an LTV cap subject to appraisal and coverage at the rate in effect at lock, which means the rate line in your model is less a market forecast than a forecast of which side of their coverage test you land on. Some programs also step the max LTV down as coverage falls, so you do not get a clean 75 at 1.05, you get 70 or 65. Ask for the coverage to LTV grid in writing. That grid tells you exactly how much rate movement you can absorb before the cash out shrinks, and then you are stress testing a documented threshold instead of guessing.

Fathom's grid is the answer to your question, because it converts the rate cell into a break-even. You don't need to predict 8.25 versus 9, you need to know the rate at which the deal stops giving cash back and then decide whether you'd still own it there. If the answer is yes, plug today's rate and note the break-even next to it. If the answer is no, you're not underwriting a rate, you're underwriting a bet on rates, and the client should be told that in those words.

I plugged today's rate on a small deal and closed the refinance eleven months later at a rate that was nowhere near it, so...

Viewed from the lending side, the thing to flag is that coverage gets tested on the appraiser's market rent and the lender's expense assumptions rather than on your actual rent roll or your actual expenses. Underwriters routinely haircut rent to appraised market and add a management factor even when the borrower self manages, and a deal that shows 1.11 on the borrower's numbers can come in under 1.05 on the lender's. If your cushion is only on rate, you have left the other half uncovered. Confirm which rent figure and which expense load the program uses before you set the cell.

For anyone without a reliable way to judge a rate forecast, which is nearly everyone, the third approach is the only one that can actually be executed. If a deal only works with cash back at the refinance, that is worth knowing before you own it. The cost is that this rule passes on some deals that would have worked, and that is a fair price for never holding a property whose exit depended on a rate guess.

Sextant, the middle option is principled enough if you tie the cushion to a documented threshold rather than a round number. Take fathom's grid, find the rate where max LTV steps down, and use that as your test rate. Now the 75 or 150 basis points is a measured distance to the cliff instead of a guess. One addition: the cushion belongs on rent too. Tender's point about appraised market rent versus the rent roll costs operators more dollars than rate movement ever does, and the model should carry two rows for it.