How do you find the refinance numbers in a BRRRR strategy?

Question

Hello BP family! I been crunching numbers on a potential BRRRR strategy for a SFM. I am stuck on how would I found out what the refinance numbers would be in the refinance step of BRRRR.  The potential deal is buy for $100k. Rehab cost is $50k. ARV in that area is $230k conservatively. Rents are going $1400-1700 in same neighborhood. How would I know refinance numbers after rents. Any advice and feedback would be highly appreciated ! Thank you BP Family!

Nicholas L. · Answer

@Marcos Cardenas

if you want details on a potential loan, just call a broker.  but you should be able to run the numbers yourself.  just use a mortgage calculator and the actual costs for taxes and insurance, etc.

the rent is irrelevant... the refinance will be based on the ARV.

Alfath Ahmed · Answer

This is very simple. You can also plug into chatgpt and they can make an entire outline. I'd plug your prompt in.

Purchase: $100k

Rehab: $50k

ARV: $230k

You are buying the deal at a great value already (assuming your ARV is correct and rehab budget is actually $50k, it always goes overbudget btw).

$230,0000 *0.70 = $161,000 *0.985 = $158,585 (The bank will give you this value, subtract closing costs 2.5% from here for closing costs). I am assuming 70/30 from the bank.

True refinance value $158,585 - $100,000 - $50,000 - ($100k * 0.025 = $2,500) = $6,085

You should be able to pull cash out of the deal if your numbers are correct.

Bill B. · Answer

You buy for $100k, add $50k, if the bank agrees the ARV is $230k they’ll probably refinance you at 75% or $172,500. You win, you have an extra $22k in your pocket. If you want more cash flow you simply refinance for only $150k.

You already know the insurance and property taxes as you’re already paying them before the refinance. The rest of the payment = is determined by interest rate, mortgage amount and length of loan.

Vijay Friedman · Answer

@Marcos CardenasYou're usually working backward from the expected ARV and the refinance lender's max LTV. Once you estimate rents and operating expenses, it's also worth checking whether the projected DSCR supports the loan amount you're targeting. The refinance proceeds and cash left in the deal can look very different depending on those assumptions.

Marcos Cardenas · Answer

@Alfath Ahmed hello Alfath! Thank you for the kind feedback ! I will go over my numbers again especially budgeting for renovations. And thanks for the tip on ChatGPT ! Do you recommend also getting some refinance numbers from a few different lenders ? Thank you!

Marcos Cardenas · Answer

@Bill B. Hello Bill, thanks for the kind feedback ! Does the bank inspect the property to find the ARV? Thank you!

Marcos Cardenas · Answer

@Nicholas L. Hello Nicholas thank you for the feedback ! Okay thank you very much. I will use the ARV and mortgage calculator.

How do you find the refinance numbers in a BRRRR strategy?

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