BRRRR Deal on a $150,000 Purchase

Buying at $150,000 with $38,000 of rehab puts $203,675 into the project and $68,675 of your own cash. To get all of it back at a 75% refinance, the property needs to appraise at about $279,966. At the $250,000 ARV these pages assume, $21,800 stays in.

The $150,000 deal, line by line

Assumptions: ARV of $250,000 (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, $425 a month holding, rent of $2,125, and a 75% refinance at 7.25% with 3% costs.

Purchase $150,000, closing $3,000, rehab $38,000
Hard money loan $135,000, points $2,700, interest $7,425, holding $2,550
Total project cost $203,675, cash invested $68,675
Refinance loan $187,500, cash out $46,875, cash left $21,800 (68% recovered)
Equity after refinance $62,500, equity created $46,325
NOI $15,615, payment $1,279 a month, cash flow $266 a year, DSCR 1.02

How the ARV changes a $150,000 deal

Same price and rehab, different appraisal. All cash comes back at about $279,966, where the purchase is 54% of ARV.

ARV	Price / ARV	Cash out	Cash left	DSCR
$210,000	71%	$17,775	$50,900	1.21
$225,000	67%	$28,688	$39,988	1.13
$240,000	63%	$39,600	$29,075	1.06
$251,000	60%	$47,603	$21,073	1.01
$263,000	57%	$56,333	$12,343	0.97
$285,000	53%	$72,338	$0	0.89

How a rehab overrun changes it

At the $250,000 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
$19,000	$184,675	$49,675	$2,800	$253,849
$29,000	$194,675	$59,675	$12,800	$267,595
$38,000	$203,675	$68,675	$21,800	$279,966
$48,000	$213,675	$78,675	$31,800	$293,711
$57,000	$222,675	$87,675	$40,800	$306,082

How the refinance rate changes the rental

Cash out does not depend on the rate. Cash flow and DSCR do. On the $187,500 loan:

Refi rate	Payment	Cash flow / yr	DSCR
6.00%	$1,124	$2,125	1.16
6.50%	$1,185	$1,393	1.10
7.00%	$1,247	$645	1.04
7.25%	$1,279	$266	1.02
7.50%	$1,311	-$118	0.99
8.00%	$1,376	-$895	0.95

Run the $150,000 deal yourself

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

1. Buy

Purchase price$Buyer closing costs%$3,000Short-term loan% of price$135,000 hard money or bridge. 0 = all cash.Short-term rate%Interest-only during the holdPoints and fees% of loan$2,700

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. $2,550 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%$187,500 new loan. 70 to 75% is typical, 80% at some DSCR lenders.Refinance rate%TermyrsRefinance closing costs% of loan$5,625

Cash left in the deal

$21,800

Partial

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

$68,675 in, $46,875 out (68% recovered)

All-in cost

Purchase: $150,000
Closing costs: $3,000
Rehab: $38,000
Points and fees: $2,700
Interest, 6 mo: $7,425
Holding costs, 6 mo: $2,550
Total project cost: $203,675
Less short-term loan: -$135,000
Cash invested: $68,675
Purchase + rehab vs ARV70% rule max offer: $137,000: 75%

Refinance

New loan at 75% of ARV: $187,500
Pay off short-term loan: -$135,000
Refinance costs: -$5,625
Cash out: $46,875
Equity after refinanceARV minus new loan: $62,500
Equity createdARV minus total project cost: $46,325

Rental after refinance

Net operating income$24,225 collected, $8,611 expenses: $15,615
Debt service$1,279.08 a month: -$15,349
Annual cash flow: $266
Monthly cash flow: $22
Cash on cash (on cash left): 1.2%
DSCRNOI / debt service. Lenders want 1.0 to 1.25.: 1.02
Cap rate on cost6.2% on ARV: 7.7%

To get all your cash back

ARV neededvs $250,000 now: $279,966
Max purchase pricevs $150,000 now: $129,954
Refi LTV neededAbove what lenders offer: 84.0%

$150,000 BRRRR questions

What ARV does a $150,000 BRRRR need to get all the cash back?

About $279,966 with $38,000 of rehab, a 90% hard money loan at 11% for six months, and a 75% refinance with 3% costs. That is 87% above the purchase price. At the standard $250,000 ARV, $21,800 stays in the deal.

How much cash do I need for a $150,000 BRRRR?

About $68,675 up front: the 10% not covered by the hard money loan ($15,000), closing costs of $3,000, the $38,000 rehab, $2,700 in points, and $9,975 of interest and holding costs. Most of it comes back at the refinance if the ARV holds.

Does a $150,000 BRRRR cash flow after the refinance?

At $2,125 rent and a $187,500 loan at 7.25%, cash flow is $266 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.