BRRR Analysis Formula

[Brian Stieler]

I'm educating myself on how to properly analyze a BRRR property, and think I have the correct formula put together. Would you mind reviewing and let me know if I'm correct?

To Determine Purchase Price:

([After Repair Value] x .7) - [Repair Costs] - [Hard Money Costs] - [Estimated Purchase Price Closing Costs] - [Refinance Closing Costs] - ([Monthly Taxes & Insurance] x [Months loan held]) ≥ Purchase Price

Variables:

• [Hard Money Costs] = (((([Percentage] x [ARV]) / 12) x Months Held) + [Early Repayment Penalty*]) + ((([ARV] x [LTV Percentage]) + [Repair Costs**]) x [Points])
• [ Estimated Purchase Price Closing Costs] = [Estimated Purchase Price] x [Closing Cost Percentage {Usually 6-8%}]
• [Refinance Closing Costs] = [ARV] x [Closing Cost Percentage {Usually 6-8%}]
• [Monthly Taxes & Insurance] = Typically ~$100

Example:

• [Months Held] = 6mo
• [Hard Money Costs] = (((([12%] x [$100,000]) / 12mo) x 6mo) + [$500*]) + ((([$100,000] x [70%]) + [$20,000**]) x [3%]) = $9200
• [Purchase Price Closing Costs] = [$70,000] x [8%] = $5600
• [Refinance Closing Costs] = [$100,000] x [8%] = $8000

([$100,000] x .7) - $20,000 - $9200 - $5600 - $8000 - ($100 x 6mo) ≥ $26,600

Purchase Price = $26,600

Results:

I'll need to find a house that has an ARV of $100,000, but only pay $26,600. To help lower my overall expenses, I could look to reduce my hard money costs, shorten my hold time, and/or reduce my closing costs.

Does my math check out?