Need help with this potential BRRRR deal please

[Evan Bell]

We are looking at a house that, on the surface, looks like a good candidate for the BRRRR strategy, although when I run the numbers through the BRRRR calculator I can't make sense of them to pull the trigger on the deal. Not sure if I am inputting everything correctly, so I turn to you all....

Details:

Our purchase price is $290k

Current ARV is at $430k

Rehab cost is between $60k-$80k

Rehab time frame is estimated at 3 months

We will be using hard money to purchase/rehab with 20% down from us

HML is at 3 points and 9% interest only payments for 3 years - no prepay penalty

Refi loan would be for $350k-$370k, depending on our all in total after rehab

Interest rate for refi loan would be 5%

Market rent for the property is between $2700-$2900

Other factors to consider are:

Overall appreciation for the county is at 7.4%, with overall appreciation for our zip code at 11.9%

Expected value of house in 12-18 months (projected time of refi) is at roughly $475k-ish

Does this deal make sense at the numbers we are considering? Thanks for your help!!

[John Leavelle]

Howdy @Evan Bell

Your numbers will not work for the BRRRR strategy and get 100% (or close to it) of your cash out on the Refinancing.

Since your ARV is $430,000 your All-in costs (Purchase price, Rehab costs, Closing and Holding costs) should be no more than $301,000 or 70% of ARV.

Your Purchase price and Rehab costs estimate already put you way over that amount ($290,000 + $80,000 = $370,000).  Then you add in Closing and Holding costs.  

I'm not sure where you are getting $350K - $370K Refinance loan amount from. But don't expect more than 75% of the Appraised Value (which should be the same as your ARV). Based on your ARV that gives you a loan of $322,500.

I agree with @Will Pritchett you should not include expected annual appreciation (other than forced appreciation) into your analysis.