Investor · Leominster Ma · Member since 2019 · 305 posts · 162 votes
I am currently in the process of closing on my first BRRR and trying to figure out the best way to go about it. Here are the details
Buy at $179,000
Rehab budget $20k (basically floors, painting and some minor things)
Estimated Refinance value: $260,000
Gross Rent: 27,600
Options
1) Buy the home with a conventional loan. Keep the home as is and don't refinance. Cash Outlay would be about $65,000, Cash on Cash return 32%, Cashflow $11,500 a year
2) Hard Money loan to cover the repairs then refinance out at $260,000. Cash Outlay would be about $20,000, Cash on Cash Return 37%, Cashflow $7,500 a year
3) Is there a better way I have not thought of?
All calculations were based on a 10% vacany rate, 20% Repairs and Cap X, 5.25% interest rate, No property management
Nice but did you get approved for a conventional loan before you used a hard money lender to buy the house, or you got approved after you already did the renovations?
If you can get that kind of cash return using conventional money, just do it. Much cleaner. Your numbers are tight with just the acquisition and rehab not counting closing or carrying costs with hard money. Take the cheaper, one time close, conventional option.