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Quick note, I notice in the Total Cash Needed box, that it's including my rehab costs in this. Is there a way to add the repair cost to the loan amount, since that is how I plan to finance the repairs? I feel this is taking away from my overall ROI since it's calculating that incorrectly. Thanks!
Theres not a great way to do this on this calc. You could change the purchase price 282500 and zero out the repair cost and leave your down payment at 20% even though its really closer to 18.5%. That should give you the closest numbers. I also believe your vacancy to be low at 90.00 a month it would take a years worth of saving to cover one months PITI.
@Tommy Bridwell , how are you planning to finance the renovations? Most lenders won't roll renovations into the loan. Have you identified the lender that will do that? Maybe with a commercial loan, but your terms don't reflect a commercial loan.
- What makes you think you'll be able to add $40k of value with such a relatively small renovation? Do the comps support a $300k ARV?
- Bump up repairs and CapEx to 15% combined.
- Taxes and insurance definitely look low for a $300k property.
- I don't think you'll get a loan at 4% on an investment property.
My numbers work out to ~$100/month cash flow and CoC ROI of <2%.
@Douglas Montgomery Thanks for the tip. I'll go back and see if I can play with the numbers a bit to reflect that. Also, the vacancy rate was just a general number that I've seen use on some of these calculations. Thanks for bringing that to my attention, as I believe you are right that its a bit low.
@Jaysen Medhurst I was counting on the loan covering the rehab portion of it as well as the financing for the house. From people that I've spoken to previously, they've had no issue with banks doing that? Maybe I was misinformed.
You make a lot of great points in this. This is just a ball park estimate for a property that I analyzed. The taxes and insurance were numbers straight from Redfin. Most of these other numbers would be fine tuned once I speak to my lender/agent about specifics. I'm more so focused on the calculator reflecting my initial strategy accurately, so that I can understand how to use it in the future on a property that I really want to focus on.
Thanks for the help. Any further help is greatly appreciated!
@Tommy Bridwell , I would definitely identify a lender (or 3) that will roll in renovations. Have conversations with them. Walk them through you plan. Don't just assume that product will be available or that you'll qualify.
Always verify the numbers from Redfin/Trulia/Zillow. Their tax amounts are usually pretty accurate, since they scrub public records, but insurance can be all over the place.
@Jaysen Medhurst From the people I've had conversations with that have lumped their rehab costs into their loan, this is typically done with hard money lenders. I'm not sure if most conventional mortgages will cover this. Do you know if this is accurate? That being said, I'm sure each bank is different. So I will do my due diligence in asking that up front before jumping into that strategy.
Ah, HML. That changes things, @Tommy Bridwell . In that case you should re-work your analysis as a BRRRR. The HML will be much more expensive than what you have in your report. Typically, 10-12% and 2 points or so and only for 1 year max. Then you refi into more conventional debt.
Frankly, this deal doesn't have anywhere near the spread to be considered for that strategy. If you were getting it for $200-225k, maybe.
@Jaysen Medhurst gotcha. I didn't do the BRRRR calc because I wasn't entirely sure of all the numbers needed to add in there. This was just a quick run up of something I saw. It may be more helpful if I actually tried to put more realistic numbers in there.
Thanks for the tips. I'll keep crunching those numbers and try to put better analyses in this forum.