BRRRR Deal on a $75,000 Purchase

Buying at $75,000 with $19,000 of rehab puts $101,913 into the project and $34,413 of your own cash. To get all of it back at a 75% refinance, the property needs to appraise at about $140,086. At the $125,000 ARV these pages assume, $10,975 stays in.

The $75,000 deal, line by line

Assumptions: ARV of $125,000 (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, $225 a month holding, rent of $1,075, and a 75% refinance at 7.25% with 3% costs.

Purchase $75,000, closing $1,500, rehab $19,000
Hard money loan $67,500, points $1,350, interest $3,713, holding $1,350
Total project cost $101,913, cash invested $34,413
Refinance loan $93,750, cash out $23,438, cash left $10,975 (68% recovered)
Equity after refinance $31,250, equity created $23,088
NOI $7,924, payment $640 a month, cash flow $250 a year, DSCR 1.03

How the ARV changes a $75,000 deal

Same price and rehab, different appraisal. All cash comes back at about $140,086, where the purchase is 54% of ARV.

ARV	Price / ARV	Cash out	Cash left	DSCR
$105,000	71%	$8,888	$25,525	1.23
$113,000	66%	$14,708	$19,705	1.14
$120,000	63%	$19,800	$14,613	1.08
$125,000	60%	$23,438	$10,975	1.03
$131,000	57%	$27,803	$6,610	0.99
$143,000	52%	$36,533	$0	0.90

How a rehab overrun changes it

At the $125,000 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
$10,000	$92,913	$25,413	$1,975	$127,715
$14,000	$96,913	$29,413	$5,975	$133,213
$19,000	$101,913	$34,413	$10,975	$140,086
$24,000	$106,913	$39,413	$15,975	$146,959
$29,000	$111,913	$44,413	$20,975	$153,832

How the refinance rate changes the rental

Cash out does not depend on the rate. Cash flow and DSCR do. On the $93,750 loan:

Refi rate	Payment	Cash flow / yr	DSCR
6.00%	$562	$1,179	1.17
6.50%	$593	$813	1.11
7.00%	$624	$439	1.06
7.25%	$640	$250	1.03
7.50%	$656	$58	1.01
8.00%	$688	-$331	0.96

Run the $75,000 deal yourself

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

1. Buy

Purchase price$Buyer closing costs%$1,500Short-term loan% of price$67,500 hard money or bridge. 0 = all cash.Short-term rate%Interest-only during the holdPoints and fees% of loan$1,350

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. $1,350 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%$93,750 new loan. 70 to 75% is typical, 80% at some DSCR lenders.Refinance rate%TermyrsRefinance closing costs% of loan$2,813

Cash left in the deal

$10,975

Partial

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

$34,413 in, $23,438 out (68% recovered)

All-in cost

Purchase: $75,000
Closing costs: $1,500
Rehab: $19,000
Points and fees: $1,350
Interest, 6 mo: $3,713
Holding costs, 6 mo: $1,350
Total project cost: $101,913
Less short-term loan: -$67,500
Cash invested: $34,413
Purchase + rehab vs ARV70% rule max offer: $68,500: 75%

Refinance

New loan at 75% of ARV: $93,750
Pay off short-term loan: -$67,500
Refinance costs: -$2,813
Cash out: $23,438
Equity after refinanceARV minus new loan: $31,250
Equity createdARV minus total project cost: $23,088

Rental after refinance

Net operating income$12,255 collected, $4,331 expenses: $7,924
Debt service$639.54 a month: -$7,674
Annual cash flow: $250
Monthly cash flow: $21
Cash on cash (on cash left): 2.3%
DSCRNOI / debt service. Lenders want 1.0 to 1.25.: 1.03
Cap rate on cost6.3% on ARV: 7.8%

To get all your cash back

ARV neededvs $125,000 now: $140,086
Max purchase pricevs $75,000 now: $64,908
Refi LTV neededAbove what lenders offer: 84.1%

$75,000 BRRRR questions

What ARV does a $75,000 BRRRR need to get all the cash back?

About $140,086 with $19,000 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 $125,000 ARV, $10,975 stays in the deal.

How much cash do I need for a $75,000 BRRRR?

About $34,413 up front: the 10% not covered by the hard money loan ($7,500), closing costs of $1,500, the $19,000 rehab, $1,350 in points, and $5,063 of interest and holding costs. Most of it comes back at the refinance if the ARV holds.

Does a $75,000 BRRRR cash flow after the refinance?

At $1,075 rent and a $93,750 loan at 7.25%, cash flow is $250 a year and DSCR is 1.03. The rent-to-ARV ratio decides this more than the purchase price does, and 0.85% of ARV is thin at current rates.