I need help arriving at these numbers from the BP Calculator

12 Replies

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Arriving at what numbers?

Not sure where the refi comes in.

I don't see PMI/MIP numbers.

The loan ltv means this has to be owner occupied....are the rental numbers after you move out in a year?

Your closing costs will be much higher than this, particularly with prepaid taxes and insurance.

@Wayne Brooks Arriving at the "Cash on Cash ROI" after the refinance, which states an 8.64% return. Can't figure out how that ROI is being calculated.

PMI for this example is $115. Refi is 6 months.

I also cannot derive how $57,109 is the total cash needed at the bottom of the Refinance section. I have the uncertainties in red boxes in the attached pictures. 

I see you're an investor in the West Palm Beach area. I'm located in Jupiter, and am looking to invest within an hour radius. Could you shed some light on your experiences with typical closing costs? Is it typically a percentage of the sale's price? Also, are taxes and insurance prepaid upon the initial purchase of the property? After listening to dozens of podcasts and books on the subject, haven't heard this come up.

Thanks!

Initial equity is from your loan amount vs ARV. I'm curious to see where the other number comes from myself.

Also, if you’re able to get 2400 in rent before the 25k rehab, what is your expected rent after?

@Brian Shand I don’t use those calculators.  I have no idea where the errant $32k in closing cost came from.  ALL loans will have you paying about 15 mo.s in advance for insurance and property taxes....the annual premium/bill plus an additional 3 mo.s cushion in the escrow account.  Talk to a local about closing costs for specific type loans, they can give you an estimate worksheet.

@Wayne Brooks Learned something new today! Thanks for the insight. 

In case anybody new like me is reading, here's a helpful link expanding on what Wayne's talking about.

https://www.hsh.com/first-time-homebuyer/prepaid-items-vs-closing-costs.html

Wayne, do you use any calculators? How do you analyze your deals? I'm working on building an excel spreadsheet version of the BRRRR calculator which will enable me to run multiple scenarios of different down payments/purchase prices/interest rates/ARV's/etc to see what kind of numbers I'll get.

@Brian Shand . I just use an app. It’s super easy. You can plug in whatever type of financing you want. It’ll calculate your fixed costs easily.

It’s basically a mortgage calculator

The 8.64% comes from the post-refi annual cash flow divided by the Total Cash Invested. ($411.38*12)/$57,109.51

The Total Cash Invested isn't explained well but it's calculated as:

(Original loan balance @ Refi (i.e. after 6 months)  ($180,995) + Refi loan fees ($2,500) + Initial Cash Needed ($34,615.00)) - The refi loan ($161,000).

So ($180,995 + $2,500 + $34,615) - $161,000 = $57,110

Another way to look at it is that you are still investing the new equity you built paying down the original loan principal so the real formula is:

(Refi - Original Balance) + Refi Fees + Original Cash

No problem!  I actually enjoyed figuring it out (Hadn't used this calculator before). 

I'm surprised though, that the holding costs during the rehab portion are not included in that TCI number.  It seems to me that would be cash you would need to outlay.  Maybe another member can explain that exclusion.

All that said, the refi here doesn't make any sense? You would have to put more cash in, just for a higher interest rate and a lower CoC? Not sure why you'd make that choice. The idea of a refi is to get more cash out so you can go invest it elsewhere. Because the og loan is at 3.5% down, the ARV doesn't increase enough to justify the new 30% down loan you're calculating.

I was also surprised to see the holding costs during the rehab aren't factored in to the Total Cash Needed at Purchase. Should definitely budget for all expected costs. 

I understand the refi not making sense. I simply chose a different interest rate for the purpose of having a different variable in my uncertain calculations to go off of. All good points though 👍. 

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