Help me with my math! Lol

[Vitaliy Zima]

I am attempting my first true BRRR in my area. I have done a smaller one but this one is too complicated to me for some reason to calculate because I will have to have a hard money lender to get this deal done.

Here are the numbers some numbers are estimates):

Purchase 270,000 + closing cost + holding cost = 295,000

Rehab cost = 120,000

Total (closing cost, holding cost, rehab cost) = 415,000

ARV Appraisal value  at $460,000    -    take out 80% loan

Loan = 368,000 +10,000 closing cost rolled into loan = 378,000

Cash handed back to me is = 92,000 (20%)


How the heck do I calculate my CoC or ROI based on above numbers or am I doing my math completely wrong?

[Andrew Postell]

@Vitaliy Zima the step you are missing is your initial loan. It sounds like you may know that since you know how much "cash back" you are getting but we can't see that math. Formally, we can't even tell if you are doing the math correctly since we can't see that step. How you calculate your ROI is by knowing how much you came out of pocket to do the deal.

So, if you were getting an initial loan (the Buy step) of 75% of ARV, that would equal $345,000. So, $345,000 - $415,000 (your total from above) = $70,000.

$70,000 is your initial "cash out of pocket" amount.  That's your initial investment.  That's how much you need to execute the deal.

After you Rehab the property, your Refinance step would be 80% of the ARV (as you mentioned in your post), so $368,000. In this scenario, you would be receiving $13,000 cash back. Because your initial Buy step loan was for $345,000, roll in the closing costs of $10k, then that's $13,000 remaining (cash back to you).  See how we needed that information to do this math?  

So, $70,000 (your initial investment) - $10,000 (that you get back in the cash out Refinance) = $60,000. That's the amount you put into the ROI calculator. $60,000 is the amount you came out of pocket to execute on this transaction.

I hope this makes sense how I am describing this.

Also...just in case...most of us would not do this deal.  However, I'm just answering the initial question here.  Maybe your scenario was hypothetical?  If so, hope that math helps.  Feel free to call me though.  Sometimes talking it through is a little easier than reading it.  Here to help.