BRRRR Deal on a $350,000 Purchase

Buying at $350,000 with $87,000 of rehab puts $473,625 into the project and $158,625 of your own cash. To get all of it back at a 75% refinance, the property needs to appraise at about $651,031. At the $583,000 ARV these pages assume, $49,493 stays in.

The $350,000 deal, line by line

Assumptions: ARV of $583,000 (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, $1,000 a month holding, rent of $4,950, and a 75% refinance at 7.25% with 3% costs.

Purchase $350,000, closing $7,000, rehab $87,000
Hard money loan $315,000, points $6,300, interest $17,325, holding $6,000
Total project cost $473,625, cash invested $158,625
Refinance loan $437,250, cash out $109,133, cash left $49,493 (69% recovered)
Equity after refinance $145,750, equity created $109,375
NOI $36,362, payment $2,983 a month, cash flow $568 a year, DSCR 1.02

How the ARV changes a $350,000 deal

Same price and rehab, different appraisal. All cash comes back at about $651,031, where the purchase is 54% of ARV.

ARV	Price / ARV	Cash out	Cash left	DSCR
$490,000	71%	$41,475	$117,150	1.21
$525,000	67%	$66,938	$91,688	1.13
$560,000	63%	$92,400	$66,225	1.06
$585,000	60%	$110,588	$48,038	1.01
$613,000	57%	$130,958	$27,668	0.97
$665,000	53%	$168,788	$0	0.89

How a rehab overrun changes it

At the $583,000 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
$44,000	$430,625	$115,625	$6,493	$591,924
$65,000	$451,625	$136,625	$27,493	$620,790
$87,000	$473,625	$158,625	$49,493	$651,031
$109,000	$495,625	$180,625	$71,493	$681,271
$131,000	$517,625	$202,625	$93,493	$711,512

How the refinance rate changes the rental

Cash out does not depend on the rate. Cash flow and DSCR do. On the $437,250 loan:

Refi rate	Payment	Cash flow / yr	DSCR
6.00%	$2,622	$4,903	1.16
6.50%	$2,764	$3,197	1.10
7.00%	$2,909	$1,453	1.04
7.25%	$2,983	$568	1.02
7.50%	$3,057	-$326	0.99
8.00%	$3,208	-$2,139	0.94

Run the $350,000 deal yourself

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

1. Buy

Purchase price$Buyer closing costs%$7,000Short-term loan% of price$315,000 hard money or bridge. 0 = all cash.Short-term rate%Interest-only during the holdPoints and fees% of loan$6,300

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. $6,000 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%$437,250 new loan. 70 to 75% is typical, 80% at some DSCR lenders.Refinance rate%TermyrsRefinance closing costs% of loan$13,118

Cash left in the deal

$49,493

Partial

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

$158,625 in, $109,133 out (69% recovered)

All-in cost

Purchase: $350,000
Closing costs: $7,000
Rehab: $87,000
Points and fees: $6,300
Interest, 6 mo: $17,325
Holding costs, 6 mo: $6,000
Total project cost: $473,625
Less short-term loan: -$315,000
Cash invested: $158,625
Purchase + rehab vs ARV70% rule max offer: $321,100: 75%

Refinance

New loan at 75% of ARV: $437,250
Pay off short-term loan: -$315,000
Refinance costs: -$13,118
Cash out: $109,133
Equity after refinanceARV minus new loan: $145,750
Equity createdARV minus total project cost: $109,375

Rental after refinance

Net operating income$56,430 collected, $20,068 expenses: $36,362
Debt service$2,982.82 a month: -$35,794
Annual cash flow: $568
Monthly cash flow: $47
Cash on cash (on cash left): 1.1%
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 $583,000 now: $651,031
Max purchase pricevs $350,000 now: $304,490
Refi LTV neededAbove what lenders offer: 83.8%

$350,000 BRRRR questions

What ARV does a $350,000 BRRRR need to get all the cash back?

About $651,031 with $87,000 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 $583,000 ARV, $49,493 stays in the deal.

How much cash do I need for a $350,000 BRRRR?

About $158,625 up front: the 10% not covered by the hard money loan ($35,000), closing costs of $7,000, the $87,000 rehab, $6,300 in points, and $23,325 of interest and holding costs. Most of it comes back at the refinance if the ARV holds.

Does a $350,000 BRRRR cash flow after the refinance?

At $4,950 rent and a $437,250 loan at 7.25%, cash flow is $568 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.