A BRRR Example - The Numbers Crunched!

[Joe White]

Hi,

I'm trying to learn BRRRR a bit better so I created an example I was hoping I could get feedback on so I can check my understanding. I understand the numbers are basic. This is just an example.

Example:

Buy Property that is worth $100,000:

• Get it  at a discount for $80,000:
• Put $20,000 payment

Renovate: $80,000

• Its now worth $240,000

Rent It

• $1,900/ month

Refinance it:

• $240,000 AVR - $80,000 still owed = $160,000 in equity
• Mortgage payment on that $80,000 owed is $391.21 (plus tax,ect, ect)
• 70% LTV of $160k = $112,000

Repeat:

• Use $112K to buy a 2nd home & to renovate

[Anthony Gayden]

Originally posted by @Joe White:

Hi,

I'm trying to learn BRRRR a bit better so I created an example I was hoping I could get feedback on so I can check my understanding. I understand the numbers are basic. This is just an example.

Example:

Buy Property that is worth $100,000:

• Get it  at a discount for $80,000:
• Put $20,000 payment

Renovate: $80,000

• Its now worth $240,000

Rent It

• $1,900/ month

Refinance it:

• $240,000 AVR - $80,000 still owed = $160,000 in equity
• Mortgage payment on that $80,000 owed is $391.21 (plus tax,ect, ect)
• 70% LTV of $160k = $112,000

Repeat:

• Use $112K to buy a 2nd home & to renovate

Something seems off with your calculations. Why would you only be getting 70% LTV of $160,000? I think you would be getting 70% LTV of the $240,000

$100,000 Purchase Price

$20,000 down payment

$80,000 Renovation

At this point you are in for $100,000 of your money.

$240,000 ARV

$168,000 70% LTV for refinance

$80,000 owed to bank

168,000 - 80,000 = $88,000 cash payout to you 

So you would recover $88K of the $100K that you put into the property. You could use that money on your next project.