Hey BP friends,
I'm running numbers on a prop using our BP Rental Property Calculator. This purchase will be done with short term PM/HM funding. How can I properly determine ROI/NOI when funding is short term and conventional loan won't be done until 3-6 months in the deal? Should I try to use the BRRRR calculator instead? The short term figures throws the Rental Calculator metrics out of whack.
@Steve Kirsch what's your plan for the property? It sounds like you're funding the purchase and rehab with a hard money loan, rehabbing it once the seasoning period is over, and renting it out, right? If so, then that's exactly what the BRRRR calculator can help you with. It has fields for both purchase loans and refi loans, and allows you to indicate how many months before the refi occurs (which sounds like the crux of your question).
Thank you @Richie Thomas . Yes, this would be a buy n hold. Needing HM/PM for the purchase and rehab short term until refi is possible (6 months?). As for the calculator data entry, what I'm confused about is: Is the money borrowed from the HM lender the full amount of the purchase price? Do I enter that as a "Cash Purchase" or enter the down payment amount only on the next line? Also, the amortization term would only be Months, not Years. This is confusing since the calc also asks for Refinancing months which in my mind is the same as the HM loan term. If you have a sample calc that I could use as a reference to learn from, that would be great.
Thanks again for replying.
The amount borrowed from the hard money lender will depend on the terms that the lender offers you. The terms offered by private lenders will differ from those offered by corporate HM lenders like LendingHome, who I've received quotes from in the past. Those quotes were for 80-85% of the purchase price, plus 100% of the rehab costs. Your terms may vary depending on the property, your credit score and financial picture, etc.
The "Cash Purchase" field assumes you've got cash in hand to cover the full purchase price, and don't need a hard money loan. Some investors will front the cash in order to get a lower purchase price (since all-cash offers are more attractive to some sellers), and then immediately refi their purchase with no seasoning period. Not every investor can afford to do that, however.
On the BRRRR calculator, the only section in which you should have to fill in the amortization section is in the refi loan section, not the hard money / purchase loan section.
Here is the first BRRRR analysis I ever did. The hard money loan was via lending home, at a 15% downpayment plus 100% of the rehab costs. I got a pre-approval off of their website, which is where the numbers come from (9.5% interest, approx. $4200 in points and fees, etc.). They also offer rental loans as of a few weeks ago, so I got a pre-approval for one of those as well for the refi loan. I have no affiliation with LendingHome, I just like their online pre-approval process. Let me know if you find another HM lender with a similar online tool, I'm always looking out for more lending options. Also let me know if you want to walk through this BRRRR example a bit more.
@Richie Thomas This is perfect. I'll send over viable HM lender prospects as I progress through my due diligence.