BRRRR Deal on a $200,000 Purchase

Buying at $200,000 with $50,000 of rehab puts $270,950 into the project and $90,950 of your own cash. To get all of it back at a 75% refinance, the property needs to appraise at about $372,440. At the $333,000 ARV these pages assume, $28,693 stays in.

The $200,000 deal, line by line

Assumptions: ARV of $333,000 (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, $575 a month holding, rent of $2,825, and a 75% refinance at 7.25% with 3% costs.

Purchase $200,000, closing $4,000, rehab $50,000
Hard money loan $180,000, points $3,600, interest $9,900, holding $3,450
Total project cost $270,950, cash invested $90,950
Refinance loan $249,750, cash out $62,258, cash left $28,693 (68% recovered)
Equity after refinance $83,250, equity created $62,050
NOI $20,747, payment $1,704 a month, cash flow $302 a year, DSCR 1.01

How the ARV changes a $200,000 deal

Same price and rehab, different appraisal. All cash comes back at about $372,440, where the purchase is 54% of ARV.

ARV	Price / ARV	Cash out	Cash left	DSCR
$280,000	71%	$23,700	$67,250	1.21
$300,000	67%	$38,250	$52,700	1.13
$320,000	63%	$52,800	$38,150	1.06
$334,000	60%	$62,985	$27,965	1.01
$350,000	57%	$74,625	$16,325	0.97
$380,000	53%	$96,450	$0	0.89

How a rehab overrun changes it

At the $333,000 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
$25,000	$245,950	$65,950	$3,693	$338,076
$38,000	$258,950	$78,950	$16,693	$355,945
$50,000	$270,950	$90,950	$28,693	$372,440
$63,000	$283,950	$103,950	$41,693	$390,309
$75,000	$295,950	$115,950	$53,693	$406,804

How the refinance rate changes the rental

Cash out does not depend on the rate. Cash flow and DSCR do. On the $249,750 loan:

Refi rate	Payment	Cash flow / yr	DSCR
6.00%	$1,497	$2,779	1.15
6.50%	$1,579	$1,804	1.10
7.00%	$1,662	$808	1.04
7.25%	$1,704	$302	1.01
7.50%	$1,746	-$208	0.99
8.00%	$1,833	-$1,244	0.94

Run the $200,000 deal yourself

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

1. Buy

Purchase price$Buyer closing costs%$4,000Short-term loan% of price$180,000 hard money or bridge. 0 = all cash.Short-term rate%Interest-only during the holdPoints and fees% of loan$3,600

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. $3,450 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%$249,750 new loan. 70 to 75% is typical, 80% at some DSCR lenders.Refinance rate%TermyrsRefinance closing costs% of loan$7,493

Cash left in the deal

$28,693

Partial

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

$90,950 in, $62,258 out (68% recovered)

All-in cost

Purchase: $200,000
Closing costs: $4,000
Rehab: $50,000
Points and fees: $3,600
Interest, 6 mo: $9,900
Holding costs, 6 mo: $3,450
Total project cost: $270,950
Less short-term loan: -$180,000
Cash invested: $90,950
Purchase + rehab vs ARV70% rule max offer: $183,100: 75%

Refinance

New loan at 75% of ARV: $249,750
Pay off short-term loan: -$180,000
Refinance costs: -$7,493
Cash out: $62,258
Equity after refinanceARV minus new loan: $83,250
Equity createdARV minus total project cost: $62,050

Rental after refinance

Net operating income$32,205 collected, $11,458 expenses: $20,747
Debt service$1,703.74 a month: -$20,445
Annual cash flow: $302
Monthly cash flow: $25
Cash on cash (on cash left): 1.1%
DSCRNOI / debt service. Lenders want 1.0 to 1.25.: 1.01
Cap rate on cost6.2% on ARV: 7.7%

To get all your cash back

ARV neededvs $333,000 now: $372,440
Max purchase pricevs $200,000 now: $173,616
Refi LTV neededAbove what lenders offer: 83.9%

$200,000 BRRRR questions

What ARV does a $200,000 BRRRR need to get all the cash back?

About $372,440 with $50,000 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 $333,000 ARV, $28,693 stays in the deal.

How much cash do I need for a $200,000 BRRRR?

About $90,950 up front: the 10% not covered by the hard money loan ($20,000), closing costs of $4,000, the $50,000 rehab, $3,600 in points, and $13,350 of interest and holding costs. Most of it comes back at the refinance if the ARV holds.

Does a $200,000 BRRRR cash flow after the refinance?

At $2,825 rent and a $249,750 loan at 7.25%, cash flow is $302 a year and DSCR is 1.01. The rent-to-ARV ratio decides this more than the purchase price does, and 0.85% of ARV is thin at current rates.