BRRRR Deal Analysis Question - Am I doing this right?

Question

Hi there! I'm following up with a potential BRRRR scenario, and admittedly working on building my deal analysis skills. In this situation, the seller is considering carrying 10% of the sales price, leaving about $15,000 out-of-pocket for me. Would ideally like to BRRRR the property using a hard-money loan, and then re-fi 6-months later to pay back hard-money. Where I'm hung-up is how I get back out of the seller financed portion.

What am I missing here?

• Purchase Price: $150,000 (2,200 sq ft, 3 bed, 2 bath)
• Financing: 10% down, 10% Seller-Carry @ 7% for 10 yrs
• Rehab: $33,000 (estimated at $15/sq ft), 100% funded through Hard Money; 10% interest-only payments
• ARV: $204,000
• Monthly interest payments: $1,659, estimated rehab & seasoning period of 6 months = ~$10,000
• Refinance $204,000, 20% down = $163,200 loan
• Refi price estimated at $3,000
• Repay back hard money = $153,000
• Payback 6 months' holding costs = $10,000

Would rent at $2,000/month, netting about $250 cash-flow after paying back seller carry each money and accounting for prop management, 7% capex, 7% vacancy, 7% R&M.

Penciled all of this out so if some of the math looks off you, feel free to ask! Thank you for the read. :)

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Kyle Schoof · Answer

@Brian Ellison You can double check what you did by using a mathematical model built in excel like the one at the link below or use the one one the BiggerPockets site.

https://youtu.be/hV9O3pnel-s

JD Martin · Answer

150k purchase = 30k down. 33k rehab. 10k hard money costs. 204 ARV. 75% LTV refi= 153k. Based on these numbers it looks to me that you need $73k in cash to make this work by the time you refi. Or $58k if you're just going to pay the seller off over time.

Brian Ellison · Answer

Thank you, JD! To boil it down, it's $73k in cash to create $54k in equity ($204k ARV - $150k purch). So to make this 'equal,' would be looking at either reducing purchase price or rehab costs by ~$20k, the difference between the money in and equity created. Am I thinking about that correctly, and/or is there a 'rule-of-thumb' you're using to figure that out? Again, thank you for your time!