A value-add analysis shows how much a rehab lifts a property value and rent, and how much capital you pull back out on refinance. Enter purchase price, rehab budget, projected ARV, and stabilized rent to see forced-appreciation gain, cash left in the deal, and the new cap rate.
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Buy at $140,000, spend $45,000 on rehab, and stabilize the property at a $250,000 ARV with $2,200 monthly rent. At 75% refinance LTV and $4,000 refi costs, the model leaves about $1,500 in the deal and a 6.3% stabilized cap rate.
Forced-appreciation gain: $65,000 before transaction friction.
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It shows whether a rehab is likely to create value beyond its cost. DistressedDealRadar calculates all-in basis, forced-appreciation gain, refinance proceeds, cash left in the deal, annual NOI, and stabilized cap rate.
Use current rents from comparable finished rentals in the same area, then subtract vacancy and operating expenses. Do not use best-case rent to justify a higher purchase price.
They overlap, but they are not the same. Value-add analysis focuses on whether the rehab creates forced appreciation and stronger rent. BRRRR analysis adds the full buy, rehab, rent, refinance, repeat cycle and debt-service math.