A flip and a buy-and-hold can both look good on their own terms: one shows a big percentage return in six months, the other a small monthly cash flow forever. IRR and NPV put them on the same scale. Here is one house run both ways.
A single-family home bought for $180,000 with $3,000 of closing costs, needing $40,000 of work, and worth an estimated $280,000 once repaired (the after-repair value, or ARV). Market rent after the rehab is $2,500 a month. These are the default inputs of the BRRRR calculator; the flip uses the same house in the house flipping calculator.
The 70% rule says pay at most 70% of ARV minus repairs: 0.70 × $280,000 − $40,000 = $156,000. At $180,000 this house already fails the rule, which is a warning that the margin will be thin.
| Flip line | Amount |
|---|---|
| Purchase + 2% closing costs | $183,600 |
| Rehab | $40,000 |
| Hard-money interest (11% on $193,000 for 6 months) and 2 points | $14,475 |
| Carrying costs, $900 a month for 6 months | $5,400 |
| Selling costs, 7% of $280,000 | $19,600 |
| Profit before tax | $16,925 |
| Cash you bring | $50,475 |
| Return on cash in 6 months (annualized) | 33.5% (78.3%) |
The percentage looks healthy, but the dollars are small for six months of risk: one month of delay or a $10,000 repair overrun takes a large share of the profit. The gain is short-term and taxed at ordinary rates.
Buy, rehab, rent, then refinance at 75% of the $280,000 appraisal (Fannie Mae’s cash-out limit for a one-unit rental as of its August 2026 Eligibility Matrix). The $210,000 loan returns $204,750 after 2.5% closing costs, so only $18,250 of the $223,000 stays in the deal. At 7.75%, the payment is $1,504.47; after $350 of taxes and insurance and 23% of rent for vacancy, management and maintenance, cash flow is $70.53 a month.
That is a 4.6% cash-on-cash return, and on its own it hardly looks worth the work. The rest of the return comes later: principal paid down by the tenant (the loan falls to $199,180 after five years) and any rise in value.
IRR is the rate at which the present value of all cash flows equals zero; NPV is the dollar value added at a required return, here 8%. Both handle different timing, which is the whole problem with comparing a six-month flip with a five-year hold. The IRR calculator and NPV calculator take the same lists of cash flows used below.
Flip: $50,475 out today, $67,400 back in six months. IRR is 78.3% a year; NPV at 8% is $14,381.
BRRRR hold, sold after 5 years: year 0 is the cash left in (−$18,250, treating the refinance as closing in year 0), years 1 to 4 are $846.41 each, and year 5 adds the sale price less 7% selling costs and the remaining loan. These returns are before tax; exchanging the rental for another under section 1031 instead of selling defers the gain, which the 1031 exchange calculator works out with its 45- and 180-day deadlines. The sale price depends on appreciation, so here are three cases:
| Appreciation | Sale price in year 5 | Net to you after selling costs and loan payoff | IRR | NPV at 8% |
|---|---|---|---|---|
| 0.0% a year | $280,000 | $61,220 | 30.4% | $26,795 |
| 3.0% a year | $324,597 | $102,695 | 43.9% | $55,022 |
| 5.0% a year | $357,359 | $133,163 | 51.3% | $75,758 |
With little cash left in the deal, the hold’s IRR is very high in every case, and its NPV beats the flip’s whenever the house at least holds its value. The trade-off is risk: the hold depends on the appraisal at refinance, five years of tenants and repairs, and the sale price; the flip is over in six months. A very high IRR on a small cash base is also a sign to look at the dollars, which is why NPV belongs next to it.
It depends on the deal and your time. A flip returns cash in months but its profit is taxed as ordinary income; a BRRRR hold earns slowly from cash flow, loan paydown and appreciation. Compare them with IRR and NPV over the same cash flows.
There is no standard target. Compare the IRR with what your money could earn elsewhere at similar risk, and check the NPV so a high percentage on a tiny cash base does not mislead you.
At a $280,000 ARV and $40,000 of repairs, the rule caps the price at $156,000. Paying $180,000 leaves less room for financing, holding and selling costs, which is why the flip profit is thin.
Cash-on-cash is one year’s cash flow divided by the cash invested. IRR includes every year’s cash flow and the sale, and accounts for when each dollar arrives.
For a Fannie Mae cash-out refinance you generally need six months on title, and a first mortgage being paid off must be 12 months old. The delayed-financing exception for all-cash buyers allows sooner refinancing but caps the loan at your documented cost.
Use both. IRR ranks returns as a rate; NPV shows the dollars added at your required return and handles deals of different sizes better.