How to calculate NEEDED ARV to cash out of BRRRR?

[Paul Sterman]

Hi,

I would find it very helpful to figure out what ARV I would need in order to cash out a BRRRR.

Is this the correct calculation or am I missing something (assuming refi at 80% of ARV):

NEEDED ARV = (purchase price + rehab costs) X 1.25

Is that the correct calculation to figure out if I would get my down payment (included in the purchase price) and my rehab costs back? Or am I missing something?

Thanks!

[Curt Neider]

Paul, 

That works out great for "back of the napkin" math. In reality, you'll want to consider closing costs, finance fees, interest, etc. because these can add up quickly. Even in an "all cash" scenario, you would still need to build in some buffers. 

Good luck! 

Curt