BRRRR Deal on a $250,000 Purchase

Buying at $250,000 with $63,000 of rehab puts $339,075 into the project and $114,075 of your own cash. To get all of it back at a 75% refinance, the property needs to appraise at about $466,082. At the $417,000 ARV these pages assume, $35,708 stays in.

The $250,000 deal, line by line

Assumptions: ARV of $417,000 (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, $700 a month holding, rent of $3,550, and a 75% refinance at 7.25% with 3% costs.

Purchase $250,000, closing $5,000, rehab $63,000
Hard money loan $225,000, points $4,500, interest $12,375, holding $4,200
Total project cost $339,075, cash invested $114,075
Refinance loan $312,750, cash out $78,368, cash left $35,708 (69% recovered)
Equity after refinance $104,250, equity created $77,925
NOI $26,096, payment $2,134 a month, cash flow $494 a year, DSCR 1.02

How the ARV changes a $250,000 deal

Same price and rehab, different appraisal. All cash comes back at about $466,082, where the purchase is 54% of ARV.

ARV	Price / ARV	Cash out	Cash left	DSCR
$350,000	71%	$29,625	$84,450	1.21
$375,000	67%	$47,813	$66,263	1.13
$400,000	63%	$66,000	$48,075	1.06
$418,000	60%	$79,095	$34,980	1.02
$438,000	57%	$93,645	$20,430	0.97
$475,000	53%	$120,563	$0	0.89

How a rehab overrun changes it

At the $417,000 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
$32,000	$308,075	$83,075	$4,708	$423,471
$47,000	$323,075	$98,075	$19,708	$444,089
$63,000	$339,075	$114,075	$35,708	$466,082
$79,000	$355,075	$130,075	$51,708	$488,076
$95,000	$371,075	$146,075	$67,708	$510,069

How the refinance rate changes the rental

Cash out does not depend on the rate. Cash flow and DSCR do. On the $312,750 loan:

Refi rate	Payment	Cash flow / yr	DSCR
6.00%	$1,875	$3,595	1.16
6.50%	$1,977	$2,375	1.10
7.00%	$2,081	$1,128	1.05
7.25%	$2,134	$494	1.02
7.50%	$2,187	-$145	0.99
8.00%	$2,295	-$1,442	0.95

Run the $250,000 deal yourself

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

1. Buy

Purchase price$Buyer closing costs%$5,000Short-term loan% of price$225,000 hard money or bridge. 0 = all cash.Short-term rate%Interest-only during the holdPoints and fees% of loan$4,500

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. $4,200 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%$312,750 new loan. 70 to 75% is typical, 80% at some DSCR lenders.Refinance rate%TermyrsRefinance closing costs% of loan$9,383

Cash left in the deal

$35,708

Partial

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

$114,075 in, $78,368 out (69% recovered)

All-in cost

Purchase: $250,000
Closing costs: $5,000
Rehab: $63,000
Points and fees: $4,500
Interest, 6 mo: $12,375
Holding costs, 6 mo: $4,200
Total project cost: $339,075
Less short-term loan: -$225,000
Cash invested: $114,075
Purchase + rehab vs ARV70% rule max offer: $228,900: 75%

Refinance

New loan at 75% of ARV: $312,750
Pay off short-term loan: -$225,000
Refinance costs: -$9,383
Cash out: $78,368
Equity after refinanceARV minus new loan: $104,250
Equity createdARV minus total project cost: $77,925

Rental after refinance

Net operating income$40,470 collected, $14,374 expenses: $26,096
Debt service$2,133.51 a month: -$25,602
Annual cash flow: $494
Monthly cash flow: $41
Cash on cash (on cash left): 1.4%
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 $417,000 now: $466,082
Max purchase pricevs $250,000 now: $217,166
Refi LTV neededAbove what lenders offer: 83.8%

$250,000 BRRRR questions

What ARV does a $250,000 BRRRR need to get all the cash back?

About $466,082 with $63,000 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 $417,000 ARV, $35,708 stays in the deal.

How much cash do I need for a $250,000 BRRRR?

About $114,075 up front: the 10% not covered by the hard money loan ($25,000), closing costs of $5,000, the $63,000 rehab, $4,500 in points, and $16,575 of interest and holding costs. Most of it comes back at the refinance if the ARV holds.

Does a $250,000 BRRRR cash flow after the refinance?

At $3,550 rent and a $312,750 loan at 7.25%, cash flow is $494 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.