How to calculate hard money cost without an excel calculator?

BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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How to calculate hard money cost without an excel calculator?

Jordan RayBusiness Member
Real Estate Agent · Memphis, TN · Member since 2023 · 642 posts · 333 votes

How is it going? I am a realtor & real estate investor in the Memphis, TN market. I suck at math & I am trying to calculate how to paper analyze a BRRRR deal with hard money without using excel. Does anyone know a simple way to calculate this? 

ARV x 70% - repairs - (hard money cost) I assume but how do I break down those costs?

I have rental property now but I have never used hard money like we have it here in our market with some of our local lenders being at 100% of the purchase & 100% of the rehab just pay closings costs like points (Which are very expensive at 5 points & 12-13% interest with this method)

I am just having a hard time trusting that I am calculating this correctly... either that or I am over thinking it.

Thanks in advance!


[email protected]662-642-1458
Jordan Ray - eXp Realty5112 Reviews
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Joe Davis
Lender · Houston, Tx. · Member since 2023 · 91 posts · 60 votes
2y

I would avoid going for 100 & 100 if 5 points.. As a lender, we do 90 & 100 - but only 2 points, it's going to balance out better in my opinion. 

So 70% Loan To Value (Max) and 90% of Purchase and 100% of Rehab.

Let's say your ARV is $300,000 and your purchase is $170,000 and your rehab is $60,000

Initial loan (90% of Purchase) = $153,000

Rehab (100%) = $60,000

Total Loan = $213,000 requested. 

70% MAX of $300,000 = $210,000 - So we would adjust the loan to this. 

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  • Account Closed
    Investor · Member since 2023 · 118 posts · 61 votes
    2y

    Assuming loan is 70% of ARV (that's 100% of purchase + 100% of rehab), and it takes you 6 months to complete, and terms are, as you said, 5pts and 13%:

    Loan = 70% x ARV

    Loan cost = 5% x Loan + (13%/2) x Loan

    1Reply
  • Jordan RayBusiness Member
    OP
    Real Estate Agent · Memphis, TN · Member since 2023 · 642 posts · 333 votes
    2y
    Quote from @Account Closed:

    Assuming loan is 70% of ARV (that's 100% of purchase + 100% of rehab), and it takes you 6 months to complete, and terms are, as you said, 5pts and 13%:

    Loan = 70% x ARV

    Loan cost = 5% x Loan + (13%/2) x Loan


     Thank you. I will use this formula you sent on my next deal I analyze for myself. I appreciate it!

    [email protected]662-642-1458
    Jordan Ray - eXp Realty5112 Reviews
    WebsiteView Page
    0Reply
  • Joe Davis
    Lender · Houston, Tx. · Member since 2023 · 91 posts · 60 votes
    2y

    I would avoid going for 100 & 100 if 5 points.. As a lender, we do 90 & 100 - but only 2 points, it's going to balance out better in my opinion. 

    So 70% Loan To Value (Max) and 90% of Purchase and 100% of Rehab.

    Let's say your ARV is $300,000 and your purchase is $170,000 and your rehab is $60,000

    Initial loan (90% of Purchase) = $153,000

    Rehab (100%) = $60,000

    Total Loan = $213,000 requested. 

    70% MAX of $300,000 = $210,000 - So we would adjust the loan to this. 

    2Reply
  • Jordan RayBusiness Member
    OP
    Real Estate Agent · Memphis, TN · Member since 2023 · 642 posts · 333 votes
    2y
    Quote from @Joe Davis:

    I would avoid going for 100 & 100 if 5 points.. As a lender, we do 90 & 100 - but only 2 points, it's going to balance out better in my opinion. 

    So 70% Loan To Value (Max) and 90% of Purchase and 100% of Rehab.

    Let's say your ARV is $300,000 and your purchase is $170,000 and your rehab is $60,000

    Initial loan (90% of Purchase) = $153,000

    Rehab (100%) = $60,000

    Total Loan = $213,000 requested. 

    70% MAX of $300,000 = $210,000 - So we would adjust the loan to this. 


     Got it. I can understand why you would say that, however in my market if i can get a deal that pencils with this & be able to buy more.. this works great. Thank you 

    [email protected]662-642-1458
    Jordan Ray - eXp Realty5112 Reviews
    WebsiteView Page
    0Reply
  • Joe Davis
    Lender · Houston, Tx. · Member since 2023 · 91 posts · 60 votes
    2y
    Quote from @Jordan Ray:
    Quote from @Joe Davis:

    I would avoid going for 100 & 100 if 5 points.. As a lender, we do 90 & 100 - but only 2 points, it's going to balance out better in my opinion. 

    So 70% Loan To Value (Max) and 90% of Purchase and 100% of Rehab.

    Let's say your ARV is $300,000 and your purchase is $170,000 and your rehab is $60,000

    Initial loan (90% of Purchase) = $153,000

    Rehab (100%) = $60,000

    Total Loan = $213,000 requested. 

    70% MAX of $300,000 = $210,000 - So we would adjust the loan to this. 


     Got it. I can understand why you would say that, however in my market if i can get a deal that pencils with this & be able to buy more.. this works great. Thank you 


     Are they going to wrap the 5 points into the loan? Make sure that's the case otherwise the 5 points might equate to more than the 10% down and 2 points. Also - love Memphis, great rental market. 

    1Reply
  • Jordan RayBusiness Member
    OP
    Real Estate Agent · Memphis, TN · Member since 2023 · 642 posts · 333 votes
    2y
    Quote from @Account Closed:

    Assuming loan is 70% of ARV (that's 100% of purchase + 100% of rehab), and it takes you 6 months to complete, and terms are, as you said, 5pts and 13%:

    Loan = 70% x ARV

    Loan cost = 5% x Loan + (13%/2) x Loan

    Thanks!
    [email protected]662-642-1458
    Jordan Ray - eXp Realty5112 Reviews
    WebsiteView Page
    0Reply
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