BRRRR Calculator - Are some calculations just wrong?

2 Replies

Warning: Newbie questions contained below :)


I have been testing the BRRRR Calculator and my train of thought tells me two values should be calculated differently.

Calculation 1: Rehab - Total Cash Outlay

Currently this field does not seem to add Aquisition Loan Points/Fees to the Total Cash Outlay. Is this correct or am I missing something?


Calculation 2: Refinance -  Total Cash Invested

The equation seems to be: Total Cash Needed At Purchase - (Refinance loan amount - Purchase Loan amount)

My thinking is Total Cash Needed at Purchase should be exchanged for Total cash outlay because the purchase loan is being repaid with CASH during the rehab phase. The CoC of course would be affected here.

Let me know if I am just overthinking this. 

Cheers

Howdy @Neddie Smith

Can you post the actual numbers in the order that the BRRRR report would show. I do not use the BP calculator anymore. I have a different one I use. However, the math is still the same. Not sure what you are referring to when you say "Calculation 1" and "Calculation 2".

You will have:

Purchase price

Purchase Closing costs

Rehab Costs (for the BP calculator this entry should also include Holding costs)

ARV

Total cost of Project 

Time to Rehab

Time to Refinance 

Acquisition:

Down payment 

Loan Amount 

Loan points/Fees

Amortized over

Interest rate 

P&I

Total Cash needed at Purchase 

Refinance:

Loan Amount 

Closing costs/Fees

Amortized over 

Interest rate 

P&I

Total Cash Invested 

Here’s my interpretation of what you may be asking.

1.  Total Cash needed at Purchase = Down payment, Closing costs, and whatever amount is left not paid by the Hard Money loan.  I.e.  Rehab costs (including Holding costs).

Not sure where the “Total Cash Outlay” entry is.

The Purchase Loan is not being repaid with cash during the Rehab phase.  It is paid off when you do the Refinance loan.

2.  Total Cash Invested = Ideally this should be Total Cost of Project - Refinance loan Amount = 0

Provide some numbers so I can see what you may be doing wrong.

Hey John,

calcualtion 1 & 2 were just to reference the two items on the BRRRR calculator - "Total Cash needed at Purchase" and "Total Cash Outlay".

So let's just ignore the Total Cash Outlay, I do not understand it either and it is not explained in the BRRRR calculator.

I completely agree with your equation for Total Cash needed at Purchase.

Regarding the Rehab phase, the monthly interest payment is being paid to the hard money lender during the term of the loan - correct?

After thinking about it, what I am looking to understand is if this equation is correct:

Total Cost of Project (in cash) =  Purchase Loan Down payment + Loan Fees + Closing Costs + (Estimated Repairs + (Rehab Duration * (Expenses + Monthly Interest payment ))

Is that correct?

Thanks!

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