BRRRR Deal on a $100,000 Purchase

Buying at $100,000 with $25,000 of rehab puts $135,400 into the project and $45,400 of your own cash. To get all of it back at a 75% refinance, the property needs to appraise at about $186,117. At the $167,000 ARV these pages assume, $13,908 stays in.

The $100,000 deal, line by line

Assumptions: ARV of $167,000 (purchase at 60% of ARV), rehab at 15% of ARV, 2% closing, a 90% hard money loan at 11% with 2 points over 6 months, $275 a month holding, rent of $1,425, and a 75% refinance at 7.25% with 3% costs.

Purchase $100,000, closing $2,000, rehab $25,000
Hard money loan $90,000, points $1,800, interest $4,950, holding $1,650
Total project cost $135,400, cash invested $45,400
Refinance loan $125,250, cash out $31,493, cash left $13,908 (69% recovered)
Equity after refinance $41,750, equity created $31,600
NOI $10,482, payment $854 a month, cash flow $229 a year, DSCR 1.02

How the ARV changes a $100,000 deal

Same price and rehab, different appraisal. All cash comes back at about $186,117, where the purchase is 54% of ARV.

ARV	Price / ARV	Cash out	Cash left	DSCR
$140,000	71%	$11,850	$33,550	1.22
$150,000	67%	$19,125	$26,275	1.14
$160,000	63%	$26,400	$19,000	1.07
$167,000	60%	$31,493	$13,908	1.02
$175,000	57%	$37,313	$8,088	0.98
$190,000	53%	$48,225	$0	0.90

How a rehab overrun changes it

At the $167,000 ARV. Every rehab dollar is a cash dollar here, and it raises the ARV you need by about $1.37 (one dollar divided by 75% LTV and 97% after refinance costs).

Rehab	Total cost	Cash invested	Cash left	ARV for all cash back
$13,000	$123,400	$33,400	$1,908	$169,622
$19,000	$129,400	$39,400	$7,908	$177,869
$25,000	$135,400	$45,400	$13,908	$186,117
$31,000	$141,400	$51,400	$19,908	$194,364
$38,000	$148,400	$58,400	$26,908	$203,986

How the refinance rate changes the rental

Cash out does not depend on the rate. Cash flow and DSCR do. On the $125,250 loan:

Refi rate	Payment	Cash flow / yr	DSCR
6.00%	$751	$1,471	1.16
6.50%	$792	$982	1.10
7.00%	$833	$482	1.05
7.25%	$854	$229	1.02
7.50%	$876	-$27	1.00
8.00%	$919	-$547	0.95

Run the $100,000 deal yourself

Preloaded with the assumptions above. Change anything to match your property.

1. Buy

Purchase price$Buyer closing costs%$2,000Short-term loan% of price$90,000 hard money or bridge. 0 = all cash.Short-term rate%Interest-only during the holdPoints and fees% of loan$1,800

2. Rehab and hold

Rehab budget$Include a contingency. Paid in cash here.Months to refinancemoRehab + lease-up + lender seasoningMonthly holding costs$Taxes, insurance, utilities. $1,650 over the hold.

3. Rent

Monthly rent after rehab$Vacancy%Annual property taxes$After reassessmentAnnual insurance$HOA (monthly)$

4. Refinance

After-repair value (ARV)$What the appraiser will say, not what you hopeRefinance LTV%$125,250 new loan. 70 to 75% is typical, 80% at some DSCR lenders.Refinance rate%TermyrsRefinance closing costs% of loan$3,758

Cash left in the deal

$13,908

Partial

Partial. Half to three quarters of your cash comes back. Still a rental with a discount on the cash left in.

$45,400 in, $31,493 out (69% recovered)

All-in cost

Purchase: $100,000
Closing costs: $2,000
Rehab: $25,000
Points and fees: $1,800
Interest, 6 mo: $4,950
Holding costs, 6 mo: $1,650
Total project cost: $135,400
Less short-term loan: -$90,000
Cash invested: $45,400
Purchase + rehab vs ARV70% rule max offer: $91,900: 75%

Refinance

New loan at 75% of ARV: $125,250
Pay off short-term loan: -$90,000
Refinance costs: -$3,758
Cash out: $31,493
Equity after refinanceARV minus new loan: $41,750
Equity createdARV minus total project cost: $31,600

Rental after refinance

Net operating income$16,245 collected, $5,763 expenses: $10,482
Debt service$854.43 a month: -$10,253
Annual cash flow: $229
Monthly cash flow: $19
Cash on cash (on cash left): 1.6%
DSCRNOI / debt service. Lenders want 1.0 to 1.25.: 1.02
Cap rate on cost6.3% on ARV: 7.7%

To get all your cash back

ARV neededvs $167,000 now: $186,117
Max purchase pricevs $100,000 now: $87,211
Refi LTV neededAbove what lenders offer: 83.6%

$100,000 BRRRR questions

What ARV does a $100,000 BRRRR need to get all the cash back?

About $186,117 with $25,000 of rehab, a 90% hard money loan at 11% for six months, and a 75% refinance with 3% costs. That is 86% above the purchase price. At the standard $167,000 ARV, $13,908 stays in the deal.

How much cash do I need for a $100,000 BRRRR?

About $45,400 up front: the 10% not covered by the hard money loan ($10,000), closing costs of $2,000, the $25,000 rehab, $1,800 in points, and $6,600 of interest and holding costs. Most of it comes back at the refinance if the ARV holds.

Does a $100,000 BRRRR cash flow after the refinance?

At $1,425 rent and a $125,250 loan at 7.25%, cash flow is $229 a year and DSCR is 1.02. The rent-to-ARV ratio decides this more than the purchase price does, and 0.85% of ARV is thin at current rates.