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

-----------------------------------------------------------------------------------------

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.