I'm trying to understand the amount of money that is either left in the deal or considered "gained" through a refi.
At the highest level - What do I subtract from the big chunk of money I get from a cash out refi?
Example: If I am lucky enough to buy a property for $320k, put 25% down ($80k down :: $240k loan), put $200K towards rehab, and lets just guesstimate about $35k in closing cost and holding cost while rehabbing. So roughly $315k cash out of pocket. I guess a super conservative ARV number (likely higher) of $650k... the refi (~70%) would come out to about $450k.
What do I subtract to figure out how much money I lost/ gained? ($450k) - (initial loan amount?) - (cash out of pocket?) - (anything else?).
I'm trying to understand the amount of money that is either left in the deal or considered "gained" through a refi.
At the highest level - What do I subtract from the big chunk of money I get from a cash out refi?
Example: If I am lucky enough to buy a property for $320k, put 25% down ($80k down :: $240k loan), put $200K towards rehab, and lets just guesstimate about $35k in closing cost and holding cost while rehabbing. So roughly $315k cash out of pocket. I guess a super conservative ARV number (likely higher) of $650k... the refi (~70%) would come out to about $450k.
What do I subtract to figure out how much money I lost/ gained? ($450k) - (initial loan amount?) - (cash out of pocket?) - (anything else?).
Any info would be greatly appreciated
Think about your costs compared to the new loan amount. Your costs include the purchase price, rehab funds, closing costs, holding costs, etc. In the provided example, you are BRRRR’ing the property but leaving quite a bit of money in the deal. You would leave in the initial down payment in addition to some of the rehab funds (assuming you paid those out of pocket). A good rule of thumb when analyzing a project is to determine a good loan to ARV you are comfortable with. Many investors will go up to 75% of the ARV for their total loan amount (acquisition loan plus rehab). I would prefer to look closer to 65% to leave room for upside.