[Calc Review] Help me analyze this deal

[Chris Janis]

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

I am looking at financing this using the BRRRR method, however I have a question regarding the refinance loan. If I initially ask a hard money lender for the 135k (purchase price) plus approx. 18k (repair amount) (Total loan amount of approx. 153k), and then after repairs are complete and it gets appraised for approx. 170k, then I get a cash-out-refinance loan for 70% of the 170k which would be 119k. There would still be 34k remaining balance on the hard money loan. Is this just a bad decision to move forward with the BRRRR method or is there another way to (or is there something im missing) knock down the remaining balance needed to pay off the hard finance loan? Thanks in advance!

CJ

[Brandon Roof]

In my opinion, without even looking at the report, this would very likely be a bad idea getting stuck paying on $34k of hard money, and the percentage that represents is way too much for a BRRRR deal. You should be able to find a smaller regional bank that will provide you one mortgage that will include all your expenses (purchase price plus rehab costs) and will have a much lower interest rate than hard money, and you may end up having less than $34k left in the deal as well.

However, if your objective is to recoup as much of your money as possible, which is generally the case with any BRRRR deal, then the purchase price for this property and/or the amount of money it requires in repairs, is simply to much for this to be a viable option.

Best to move on from this option unless you think you can buy it for less than $100k.