Equity
The difference between what a property is worth and what you owe on it.
Equity is your ownership stake in a property after subtracting all debt. In a BRRRR deal, equity is created by buying below market, adding value through rehab, and refinancing at the new higher value. The gap between your cost basis and the ARV is your forced equity — value you created through the renovation.
Equity = ARV - Cost Basis (pre-refi) or ARV - Loan Balance (post-refi)
Equity position is one of the five scoring dimensions (25% weight). Kaison flags deals where equity is below 15% of ARV as HIGH risk.
ARV: $220K. Cost basis: $195K. Equity: $25K (11.4% of ARV). Kaison flags this as 'Thin equity margin' because it's below the 15% threshold. One bad appraisal and you're underwater.
Target 20%+ equity on every BRRRR deal. Below 15% and you're one market dip away from being stuck — can't refinance, can't sell without bringing cash.
After Repair Value (ARV)
What a property will be worth after renovations are complete.
Cost Basis (All-In Cost)
Total money invested in a property: purchase + rehab + carry + closing.
Loan-to-Value Ratio (LTV)
The loan amount as a percentage of the property's appraised value.
Refinance (Refi)
Replacing short-term acquisition debt with a long-term mortgage based on the improved value.
Comparable Sale (Comp)
A recently sold similar property used to estimate your property's value.
Educational content only. Consult a CPA or attorney for advice specific to your situation.