[Calc Review] Help me analyze this deal
Jimmy MozingoPro Member
Investor · Eastern Shore of Virginia · Member since 2020 · 45 posts · 12 votes*This link comes directly from our calculators, based on information input by the member who posted.
I went through your report, and honestly, the deal looks fine before the refinance… but the minute you plug in the refi numbers, everything gets way too tight.
Before the refinance, the property cash-flows well. You’ve only got about $1,583/mo in principal and interest, so the building makes sense during the rehab/lease-up phase.
But once you refinance, your new P&I shoots up to a little over $5,000/mo, and that’s basically the whole issue. The deal just doesn’t have the income to comfortably support that much debt.
Your report shows the cash flow after the refi dropping to around $939/mo, and that's using pretty optimistic assumptions (5% repairs, 5% CapEx, low taxes, low insurance). If you plug in realistic numbers for an older 8-unit — especially CapEx and insurance — the deal will go negative very quickly.
The other thing that jumped out: you're assuming a $900k ARV, but your own cap-rate-based ARV calculation shows around $830k. If the bank appraises closer to the lower number, you won't get the refi amount you're expecting… and the whole BRRRR structure falls apart. You could end up needing cash to close the refinance instead of pulling cash out.
So honestly? The "BRRRR" only works here if:
The ARV really does come in at or close to $900k
The lender gives you very favorable terms
You’re okay with thin or even negative cash flow for a while
Right now, the debt load is just too big for the income.
If this were mine, I’d do one of three things:
Renegotiate the purchase price to build in more room
Refi at a lower LTV, even if it means getting less money back
Skip the full BRRRR and just hold it with the lower original payment
That would make the deal safer and a lot more predictable. Jimmy, I really hope my analysis check up really helps you a bit, I sent you a DM on BP... it's one of the reasons I do this, I hope you can assist. Thank you in advance.
I went through your report, and honestly, the deal looks fine before the refinance… but the minute you plug in the refi numbers, everything gets way too tight.
Before the refinance, the property cash-flows well. You’ve only got about $1,583/mo in principal and interest, so the building makes sense during the rehab/lease-up phase.
But once you refinance, your new P&I shoots up to a little over $5,000/mo, and that’s basically the whole issue. The deal just doesn’t have the income to comfortably support that much debt.
Your report shows the cash flow after the refi dropping to around $939/mo, and that's using pretty optimistic assumptions (5% repairs, 5% CapEx, low taxes, low insurance). If you plug in realistic numbers for an older 8-unit — especially CapEx and insurance — the deal will go negative very quickly.
The other thing that jumped out: you're assuming a $900k ARV, but your own cap-rate-based ARV calculation shows around $830k. If the bank appraises closer to the lower number, you won't get the refi amount you're expecting… and the whole BRRRR structure falls apart. You could end up needing cash to close the refinance instead of pulling cash out.
So honestly? The "BRRRR" only works here if:
The ARV really does come in at or close to $900k
The lender gives you very favorable terms
You’re okay with thin or even negative cash flow for a while
Right now, the debt load is just too big for the income.
If this were mine, I’d do one of three things:
Renegotiate the purchase price to build in more room
Refi at a lower LTV, even if it means getting less money back
Skip the full BRRRR and just hold it with the lower original payment
That would make the deal safer and a lot more predictable. Jimmy, I really hope my analysis check up really helps you a bit, I sent you a DM on BP... it's one of the reasons I do this, I hope you can assist. Thank you in advance.
*This link comes directly from our calculators, based on information input by the member who posted.
@Jimmy Mozingo There's a big leap to get to that ARV...how realistic is that?