# Calculating property for BRRRR Strategy

2 Replies

Hi All,

I'm scrolling through properties just so I can get my mathematical up and discovered this property where I was running comps for. Below are the exact numbers that I calculated and would like to know if I'm doing it right.

• Purchase price 133,614
• Down payment (20%) \$26,722.8
• After repair value 190,878
• Property Taxes \$255
• Home Insurance \$66
• PM \$160
• Mortgage \$583
• HOA 0
• Vacancy (10%) \$160
• Repairs (5%)  \$80
• 1600 Monthly rent
• -1304 the cost

Monthly Cash flow is 296

Cap Rate

Annual net(minus mortgage)/ purchase price

10548/133,614

7.9% cap rate

Cash on cash

Annual net/ Cash invested

3552/26722.8

13.29% cash on cash

Note: I haven't included CapEx.

@Talha Makki It looks pretty close. Just a few items I picked up on. You didn't provide me with the interest rate so I just assumed interest at 5.140% off of the principal payment you provided.

As far as your actual mathematical calculations, yes it is all right except for:

1 - your Cash-on-cash you are correct in it being 13.29% if you do not factor in closing costs however, if you factor in 3% (\$4,008) closing costs your cash-on-cash is 11.56%

2 - you cash flow of \$296 is mathematically correct however, understand that your property management will be based off of collected rent and if you are factoring 10% vacancy the correct way would actually be to factor your PM fee after vacancy is accounted for because again most PM fees are on 'collected' rent - so if you run PM AFTER vacancy your PM fees are 1,728/yr. and in turn your cash flow is actually \$312/mo. (\$3,744/yr.). That is the correct way of running it however your way is conservative and there's nothing wrong with doing it conservatively.

3 - in conjunction with #2, once you calculate PM fees after vacancy, then your cap rate changes from 7.9% (actually 7.89%) to 8.04%. Additionally, once you do this your cash-on-cash will again change to 12.18% so.......

• Purchase price 133,614 (106,891 loan at 5.14% interest  30 yr. fixed)
• Down payment (20%) \$26,722.8
• CLOSING COSTS (3%)  \$4,008.42
• Property Taxes \$255
• Home Insurance \$66
• PM \$160   \$144 (minus 10% vacancy - \$16)
• Mortgage \$583
• HOA 0
• Vacancy (10%) \$160
• Repairs (5%) \$80
• 1600 Monthly rent

Monthly Cash flow is 296  312

Cap Rate

Annual net(minus mortgage)/ purchase price

10548/133,614     10740/133,614

7.9% cap rate  8.04% cap rate

Cash on cash

Annual net/ Cash invested

3552/26722.8      3774/30731.22

13.29% cash on cash  12.18% cash-on-cash ROI

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Then I've got the following numbers if you decided to do your own PM at:

Cashflow - \$456/mo. (5,472/yr.)

ROI - 17.81%

Cap - 9.33%

I hope I was able to help Talha.

Hi @Alex R. really appreciate your explanation.