WHAT AM I DOING WRONG Help me analyze this deal

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John Leavelle · Answer

@Corey Jacques

Infinite CCR is the ultimate goal of the BRRRR strategy.  The others explained how you got there.

If you are using a conventional loan for the acquisition why are you only putting a 15% down payment?  And why do you have points?

You did not include Refinance Closing costs/Fees.

Did you include Holding costs in your Rehab estimate?  These include (but not limited to) mortgage payments, taxes, insurance, utilities, HOA fees, etc.

Bill F. · Answer

@Corey Jacques

@Robin Dassy is right in the math portion. When you refi, you'll pull the original $30k you had invested out leaving you with a ROI evacuation of $1,059/$0, which is incalculable or infinite return for our sake.

If you get a $133k loan you will met the 12% ROI, but miss the $100/month. You'll theoretically get $74/month cash flow.

The questions I'd have are:

1. How did you arrive at the Repair cost? What all are you planing on fixing? $15k seem a little low for anything but new floors, carpet, paint, and fixtures.

2. How recent are the comps that support the $190k valuation? Not saying you are wrong, but if your repairs and ARV are correct, you are buying this at a 50% discount. Put another way. following the "70% rule" [ {ARV-Repairs}*.7=purchase price], this house could support $60k in repairs.

These BP "rules" are more like guidelines, but they do have some basis in reality so any time I see something that varies massively from them I like to re-check my numbers to make sure I have rock solid Repairs and ARV values.

Finally, since it looks like you aren't doing a full rehab, your CapEx reserves are too low unless you plan on using the proceeds from the refi as Repair/CapEx reserves.

Robin Dassy · Answer

Good morning @Corey Jacques!I went through your analysis report really quick, and I believe the reason your results look off is because you left the "Total Cash Invested" field at $0 in the refinance section of the analysis.This would potentially cause the calculations for your CoC ROI and Annualized Return to have that $0 as a denominator, returning "infinite" as a result starting on the year you planned to refinance.Hope this helped, let me know if you have any more issues.Have a great day!

John Leavelle · Answer

@Corey Jacques

No problem.  That is what this site is for.

One last suggestion.  When you are communicating with others here on BP be sure to tag them so they know you mentioned them.   This is how you do it:

Type the @ symbol and the first three letters of their name “Joh”.  A list of members will appear near the top of your current post.  Just click on the one you want and their name will post just like yours at the top of this post (in blue).  If it shows up black you didn’t do correctly.  This will cause the system to send me or whoever a message notifying me you mentioned me.

Corey Jacques · Answer

No I didn't even think about these charges. This is just a preliminary look. Thank you for all of the information. I really like the 70% rule. I am just getting into investing into properties and running the report so I don't have all of the answers to your questions. Thank you for asking such questions to allow me to start to add these type of issues into my analysis. If you have any more suggestions on how to analyze these properties with more accuracy I am open to any and all suggestions. Be on the lookout for additional analysis, the more I do this the more I will learn. Thanks again for your questions.

Corey Jacques · Answer

Hi John, my formulas said that I have an infinite amount of income  potential  so I'm not sure what I did wrong.  I was planning on using a  conventional loan  and my criteria is at least $100 a month  12% cash on cash return .

John Leavelle · Answer

Howdy @Corey Jacques

Why do you think you are doing something wrong?

2 questions I have:

What type Financing are you using for the acquisition loan?

What is your desired Cash Flow criteria?

WHAT AM I DOING WRONG Help me analyze this deal

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