Seller Finance BRRRR? Help me analyze this deal

[Adrian Gonzalez]

Hey BP,

I would like to get feedback on this analysis. I'm not buying, the goal here is to understand how the numbers make this work and what will sink this deal. I understand that a bank won’t loan for this type of property and price, these are just estimated numbers. The sale price is what’s currently listed. The goal is cash flow, is this even worth it?

Financing Strategy

Owner Finance – HELOC (down payment 10%) + private lending (Rehab) / Refi at ARV 100k+ / negotiate monthly note or pay in full

The Deal

Purchase Price: $50,362 (25% disc from $67,000)

Loan Interest: 6%

ARV: $97150

*I averaged this from surrounding properties, should rehab cost be added to this? Or should rehab cost raise the current appraised value higher than surrounding comps?

*How is this calculated when comps range from 67k - 145K?

Estimated Repair cost: $30,000

* I'm sure this property needs way more than this, more of a reason to negotiate sales price even lower.

Purchase Loan Details

Owner Finance

Down Payment: $10,072 @ 10%

Loan Interest: 6%

Note Period: 30 years

Refi: after 6 Months or less depending on financing strategy

Estimated Rehab Time: Maybe 6, it’s in a pretty rough shape. It’ll be hard not to cringe at the sight of this.

Refi Loan Details

Loan Amount: $88406

ARV: $126295

*Assuming that it'll appreciate 30% more from initial ARV of $97150. Is this even correct?

Loan Interest: 5.44% (If credit is good)

Refi Closing Costs: $2500

Amortized: 30 years

Income

Gross Monthly Rent: $950

*Could push it up to $1100 range, since comps are a bit weird in this area, low balling it here for worst case scenario

Fixed Land-lord Exp

Mo Insurance: $50

*non flood zone and tenant responsible for utilities 

Vacancy: 3 %

Repairs: 5%

Cap Ex: 5%

Management Fees: 8% (self-managing though)

Results

Monthly cash flow before refi: $300

CoC ROI: 10.30%

*Should I expect more?

Monthly cash flow after refi: $59.68 (pretty low right?)

CoC ROI: Infinite

*Is this even worth refi?

If don’t refi, how could I pull cash out to pay back lenders and myself?

Probably should just flip it or change financing strategy to cash purchase?

Strategy – HELOC (purchase property) + private lending (Rehab) / Refi at ARV 100k+

Any recommendation for good books or detailed literature on the BRRRR process is appreciated, thanks!

View report

*This link comes directly from our calculators, based on information input by the member who posted.