Rehab Price Excluded From Loan??

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How do you include the rehab cost in the loan amount? The expectation is the loan is supposed to be for the purchase and rehab price.

Greg Kasmer · Answer

Chucka - Are you staying you can't change the "loan amount" above the purchase price? I would add the rehab into the loan amount if you can. If not, I would increase the purchase price to include the purchase and renovation amount and then set your loan amount to that new number. Also, on your post refinance I would be sure to include: maintenance/repairs, vacancy, and management fees (if your'e using a 3rd party management company) to make sure you have the most accurate expenses. Lastly, I would adjust your interest rate on the loan, 4% looks very low to me - probably closer to 7% on the refinance loan interest rate. Good Luck!

Andrew Postell · Answer

@Chuka Eko yeah, what "a good BRRRR property" is defined is really up to interpretation.  So if you feel it's better as a flip that's more up to you really.  But your loan amount on that spreadsheet is the loan amount that your lender will grant you.  So whatever you lender will provide...that's the loan you put in that section.  Hope that makes sense.

Chuka Eko · Answer

@Andrew Postell Hey, I'm using the BRRRR calculator.

And the 6% was in reference to the refinance for the deal to be a good BRRRR. But the more, I run the numbers it looks like flipping would be the better option.

Andrew Postell · Answer

@Chuka Eko I can't tell which calculator you are using...maybe the rental property calculator?  In either case, you would put your total loan amount in the "loan amount" section.  Meaning, the total loan amount that your lender will give you.  You might need to get prequalified to know that answer but generally speaking we use 75% of the ARV to start.

Also, you mentioned that any rate over 6% and "the numbers don't work".  What did you mean by that?  Because every interest rate is over 6% right now...but why would that matter here?

Chuka Eko · Answer

Hey Greg,

Yeah, in the picture below, the loan amount doesn't include the rehab cost ($70k)

So like you suggested, I went ahead and added the rehab costs to the purchase price. This is actually a new construction/build that is about 75% complete. Builder stopped and abandoned in November 2022 due to foundation being under grade. I'm just going to finish it out. Therefore, I don't anticipate any repairs or fixing big ticket items. Management will be done by me. I changed the refinance rate to 6%. Anything higher and the numbers don't work.

Rehab Price Excluded From Loan??

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