How to input hard money loan in BRRRR calculator

Question

I'm having trouble figuring out how to input the information correctly into the BRRRR calculator. I'm using a hard money personal loan. Here are the numbers:

Fee: 9.9% of loan total

Int. rate:  8%

Amortized: 7 years

Questions:

Is the 9.9% considered points? If not, where does that figure go in the calculator?

Is the "other charges from the lender" a one-time charge or recurring? What should go in there?

Also, how can my monthly cashflow be negative when my CoCROI is INF%??

Jonathan Taylor Smith · Answer

Yes, if the fee is a percentage of the loan total, then I'd enter that as points. Any other fees from the lender would go into the other charges field, and these are one-time.

Nicole A. · Answer

How did you come up with $600 for rental income? If that's what you saw for comps nearby properties, you'd have to either walk from this deal or be able to purchase it for much less. John means that your other expenses across that board that you put 3% for... repairs, CapEx (big stuff like replacing roofs and large ticket items), vacancies and PM. The first three items should be *at least* 5%. And the PM will be usually 10%. You should put in this PM fee even if you plan to self-manage.

Melissa Dinas · Answer

@John Leavelle

Thanks for your response. I understand now why it is INF%, thank you!

Here's my thought process on the expenses: I only put 3% on repairs & capex because this particular property has been (mostly) rehabbed by the current owner who ran out of money and can't do anymore. I will put in some more to shore up whatever else needs to be done so I'm not expecting any major repairs for the next foreseeable years. I usually have those expenses at 6-8%. Do you think I'm still tricking myself? In other words, should I put in the 6-8% in order to be ultra-conservative? What other expenses were you referring to?

I see what you mean about the negative cash flow & rental income. I have to take another look at this one.

Thanks for your reply. I appreciate you taking the time to look at my numbers and hopefully answer some more questions.

John Leavelle · Answer

@Melissa Dinas

Your CCR is infinite because after the Refinance you have Zero cash in the deal.  It doesn’t matter if you have positive or negative cash flow.  The better question is why are you getting negative cash flow.  The answer is the rental income is way too low for this deal.  It needs to be more like $900 - $1,000.  You want the monthly rent to be close to 1% of the Mortgage.  Your expenses are also unrealistic (too low).  I will be happy to explain more if you like.

Melissa Dinas · Answer

Since I'm still very new to this I may be wrong but I believe the amortization should be 7 years because it will compute what my monthly payments will be stretched out over a 7 year period. If it's only over a 6 month period, the monthly payments will be astronomically higher. The 6 month time period is to compute what my new payment will be with the new terms through the refinancing lender.

Please correct me if I'm wrong...and I'm still trying to find out how my monthly cashflow can be negative when my CoCROI is INF%??

Nicole A. · Answer

If you're refinancing in 6 months out of the hard money, wouldn't you put 6 months rather than 7 years for that amortization?Or maybe that doesn't matter...

Melissa Dinas · Answer

Here's a link to my report:

https://www.biggerpockets.com/calculators/shared/8...

Any thoughts and advice would be greatly appreciated!

John Leavelle · Answer

Howdy @Melissa Dinas

Post your Calculator report here.  That way we have a better opportunity to see what your problem is.

Melissa Dinas · Answer

Thanks. Any idea on why CoC is inf% but monthly cash flow is negative?

How to input hard money loan in BRRRR calculator

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