Help me analysis my BRRRR report! Please :)

[Vic Vega]

Ok so I wanted to see if I could bounce my report off of some of you seasoned investors. Couple things to note...I low balled the ARV by about 5-10k since banks usually don't give market value appraisal for refi's. I also lowballed the estimated rental income by about $50-100 just to get a worse case scenario. I tried to get accurate estimates on some things I wasn't 100% for sure on so maybe someone can point out a possible error. But anyway what's you overall take on the numbers?

[John Leavelle]

@Vic Vega

Is this your first purchase or hypothetical? Or do you have other properties? The reason I ask is your analysis is confusing. It appears that you are making a total cash purchase and Rehab ($86,800). This goes against the BRRRR idea. You want to invest with as little of your own cash as possible in the deal. Use OPM (Other Peoples Money) to get the best COC ROI. No idea how your getting 26.15% for COC. You determine COC by dividing Total Cash Flow by your Investment Basis (COC = CF / Investment Basis). Investment Basis includes Down payment, Improvement Costs, and Closing Costs.

In your analysis the Investment basis is $86,800. You show Cash Flow as $322.55 ($3,870.60 annually). Therefore, COC = $3,870.60 / $86,800 = .0445 or 4.45 % COC ROI. Anything below 10% is not worth investing. You need to decrease the amount of your own cash invested to get a better return.

The idea of BRRRR is to get 100% (or close to it) of your cash back to repeat the process. The best way to do that is ensure your Investment basis does not exceed 70% of your projected ARV. When you refi the lender will give you a loan that is 70 - 80% of the Appraised Value. If your ARV and bank Appraisal are close then your good.

I understand you are trying to be conservative which is always a good thing. However, I do not know where you get the idea "banks usually don't give market value appraisal for refi's". Banks do not dictate the Value, the Appraisal Company they use will determine Market Value. If you (and your realtor) do your job in determining the ARV based on good comps and a detailed rehab list (both of which you should provide to the appraiser), then, the appraisal should be close to your ARV.

You really need to provide more details on properties you want assistance on. Such as; Type of property (SFR, 2-Plex, 4-Plex, Condo, etc), age of property, Current rent, vacancy, and utility info (if known). Also, include last renovation (if known). If you want to be conservative in your analysis you need to increase the amount of expenses used. As a minimum use the 50% rule (I actually use 55%). For example you did not include CapEx in your analysis. Most will use 10% CapEx, in your case is $125. That would raise your total operating cost from $552.50 (44.2%) to $677.50 (54.2%). Your Cash Flow drops to $197.55 per month.

The final thing I would recommend is to shop around for your Refi Lender first (before you purchase a property). When you find one with terms that are acceptable to you - get Pre-qualified with them! Knowing loan limits, Interest rate, seasoning requirements prior to purchasing any property makes the whole BRRRR process easier.

Hope this help.  :)