Please help me analyze my first BRRRR deal

[Valeria T.]

https://www.biggerpockets.com/calculators/shared/1683395/d49120be-904d-48d9-a428-36499f9b0a7b

[Guifre Mora]

Originally posted by @Valeria T.:

@Jaysen Medhurst Thanks again for your insight. I'll make the HML rate/points adjustments. We decided to hold and observe for now, reassessing week by week, how prices in that area are affected by the pandemic and pending recession. Am anticipating that we will have more room to push down the purchase price due to current/projected state of affairs. Stay safe and healthy : )

Thanks again, Val

That is true but also your ARV will be lower based on your observations. Keep that in mind.

Also just chiming in on the previous threads, for your future analysis these calculators are little misleading and leave quite a few items out of the equation let me explain:

When you analyze a deal for rehab buy and hold you need to split it in two.

1) Rehab project. During rehab, the property yields zero cash flow. So the pre-refi calculation can not have positive cashflow correct? 

All costs you need to pay out of pocket that is not in the rehab budget. 

Utilities, hard money loans draw fees, insurance, and you may need to pay contractors before you get the wire on the draw. Most of the time the HML will reserve the rehab portion in escrow and won't release it until rehab portions are completed. You need to add the rental portion into the project 1 week to 2 months to find a tenant before you can refinance.

Also, another item to consider is the day you close escrow in the purchase as the lender will charge prorated interest. If you close on the 15th you pay interest for 15 days before your first payment on the 1st of the month. Something to calculate in the closing portion of the calculation. 

So backing out some of your down payment and leveraging the HML to 30% will leave enough funds for the project and the unexpected expense.

2) Now you analyze the rental's potential income and expenses (post refinance).