First BRRRR - are my calculation correct?

40 Replies

The goal with BRRR and flipping is to find a property where you can increase the value at amounts more than the cost of repairs. In the numbers you have given, your ARV is below the cost of the property plus repairs. So this would not be a good BRRR or Flip candidate.

@Russell Brazil Hi Russell, that makes sense! Thank you for clarifying. So what your saying is if I increase the ARV, this would be a better deal? I'm almost positive the ARV is higher than what I entered (122,000 is what Zillow estimated the house is worth but based on what we upgrade it believe the ARV would be higher).

Like it said, this is the very first one. I'm wanting to avoid any miscalculations for the next property. Let me know if you have any other pointers. I'm being thrown off by the numbers because the ROI and monthly cashflow

Yes you either need a higher ARV or a lower purchase price.

For instance buy a property for $100k, put $50k into it, ARV is $200k. Cash out refinance and pull the $150k back out, now you have a property worth $200k with $50k equity in it and have your $150k working capital back.

Look at locations with high price spreads between rehabbed and non-rehabbed homes.  In my market, that will generally be in gentrifying locations.

@Daisy Ferreiras

The best use of the calculator is to help you decide if a property is worth investing in BEFORE you purchase and rehab.

Using it after to decide if you made a good investment is like closing the barn door AFTER the horse has left the barn.

As @Russell Brazil indicated knowing your numbers and what they mean will help you analyze the deals before your purchase.

Most rehabbers would have passed on this deal.

It's a good deal for someone buying to live in, but not as a BRRRR

@Brian Van Pelt hi Brian, thank you! we didn’t know what bigger pockets was before we bought the house - we kind of fell into this investment by chance and worked with what we got! Looking at my second deal and learning how to use the calculator to better analyze the property. The only good thing about this property is that it’s an opportunity zone!

@Daisy Ferreiras

I will preface that I have yet to move on even one investment property, but your numbers look great for a first go at it. The comments above seem to overlook the fact that this is your first one. I am sure future properties and the associated numbers will improve. I think the most important part now is to be comfortable with the movements through the process.

I say good job. Please post more information on the property as you move through all the steps. I would be interested to know if the numbers you present hold true, specifically in regards to the rental income and projected home value.

@Jonathan White thanks Jonathan! I truly appreciate the kind words. I’m hopeful that my numbers will be better next time! I actually just got it rented yesterday - $1200 a month. We paid cash for the property so we’ll at least be getting a good return per month until we refi.

Thanks again for the encouraging words! It’s hard starting out so it’s easy to get discouraged.

@Daisy Ferreiras I think you hit a home run! You left roughly 6k in the deal. If your expenses are even close to right, you're going to recover your money in the first year and you did this on ACCIDENT! Not knowing what you were doing. I say cash out refinance that baby and reinvest your principal. In a best case BRRRR scenario your get all your money and then some! This is definitely still a great deal. Especially because it was your first and I'm assuming you didn't really know what your were doing. The same as a lot of us when we started! Let me know the last time your 401k gave you that kind of return year one. CONGRATS GIRL! HATERS ARE GONNA HATE! Screw em!

Hey @Daisy Ferreiras

@Russell Brazil  and @Brian Van Pelt are on point with their observations.

These investments are really numbers driven and the more you break down the numbers, the better you're going to be at it.

If you break down the deal, you paid $126,662 for a property with an ARV of $122,000 and you paid cash.

Here are some pointers.  

  1. Never fall in love with a property.  Be prepared to walk away if the numbers don't work.
  2. If the ARV is truly 122K, then NEVER go past 75% of the ARV; all in. That means your acquisition, rehab and closing costs should not have exceeded $91,500. Most hard money guidelines won't allow the borrowers to exceed that number, even if they provide 85% of the acquisition costs and 100% of the rehab money in the form of a draw.
  3. Using hard money or some other form of loan with the loan, you could have bought many more homes with the cash you had. On a loan where you bought it right (see above), your cash out of pocket would have been have been about 10,000. Yes, you would have paid interest and points and you'd have to factor those costs in, but the peace of mind having cash in your pocket can sometimes mitigate those costs.

You've obviously got passion for this and a great attitude.  Welcome to Bigger pockets.  Don't hesitate to reach out on the forums for advice.

Best of luck

Stephanie

Originally posted by @Michael Cuppernell :

@Daisy Ferreiras I think you hit a home run! You left roughly 6k in the deal. If your expenses are even close to right, you're going to recover your money in the first year and you did this on ACCIDENT! Not knowing what you were doing. I say cash out refinance that baby and reinvest your principal. In a best case BRRRR scenario your get all your money and then some! This is definitely still a great deal. Especially because it was your first and I'm assuming you didn't really know what your were doing. The same as a lot of us when we started! Let me know the last time your 401k gave you that kind of return year one. CONGRATS GIRL! HATERS ARE GONNA HATE! Screw em!

I don't think you read the same report I did.

 

Originally posted by @Jonathan White :

@Daisy Ferreiras

I will preface that I have yet to move on even one investment property, but your numbers look great for a first go at it. The comments above seem to overlook the fact that this is your first one. I am sure future properties and the associated numbers will improve. I think the most important part now is to be comfortable with the movements through the process.

I say good job. Please post more information on the property as you move through all the steps. I would be interested to know if the numbers you present hold true, specifically in regards to the rental income and projected home value.

 The best part about numbers is they don't care if it's your first one or 100th one.  Either the numbers work or they don't and if they don't, walk away.  It's no more complicated than that.

There is no Equity Spread observed in this report, Not even 10%. Therefore, this is NOT a Flip or BRRR deal. This would be a typical investment property that needs repairs. As long as it Cash Flows and has a decent ROI then it looks good as a rental but not a BRRR

Decent investment but not a brrr. I am guessing the ARV is higher but still for a brrr your goal is to get your money back. For this to work you need to be all in at 75% arv. It looks like you will leave some money in the property but there is nothing wrong with that as long as it cash flows, appreciates, and the loan gets paid down you are building wealth. Congrats.

@Daisy Ferreiras good job! While the numbers may not be favorable for some, the important part is that you guys took action and the deal is working for you. Next time I'm sure you will take all the input from BP and find yourself a better deal where you don't need to leave money in it. Take sometime and look up other exit strategies like delayed financing. It'll help you get your capital out before the 6 month seasoning period. Do some research. Find some lenders willing to do it. Look at @Alexander Felice page where he publishes how his deals are structured and even provides the HUD statements to go along.