How to Use BiggerPockets Calculators Part 2: The BRRRR Calculator

Young investors figuring out the numbers to their next real estate venture

And we’re back with another way to make real estate investment analyzing easier!

This is our second installment to our BiggerPockets Calculator tutorials, where we tackle each digital tool our site has to figure out your potential returns without doing manual calculations.

The whole list of BiggerPockets calculators covers the following investment types:

• - Rental Properties-
• - BRRRR investments
• - Mortgage payments
• - Fix-and-flip projects
• - Rehab estimator tool
• - 70% Rule tool
• - Wholesaling real estate
• - Airbnb analyzer

But for this article, we’re only discussing the second one—the calculator for investments where you plan to buy, rehab, rent, refinance, and repeat (BRRRR) properties. If you’re more interested in the other tools, not to worry, we’ll walk you through them in future installments.

Read ahead to see what the calculator will ask for, what it provides, and how it all comes together with a real-life example.

BiggerPockets BRRRR Calculator

Based on the overview on BiggerPockets, the BRRRR Calculator helps you:

• - Figure out an accurate ROI analysis for your rehab property
• - Estimate the potential cash flow and budget for possible expenses
• - Create reports for lenders, patterns, and investors to see (only for Pro Members)

Now, we’ll be using the free version of this tool, which means that we’ll only achieve the first 2 things on the list. Moreover, each account can only generate 5 reports for free. If you ask us, though, 5 is more than enough to decide among the properties you have in mind.

As we move forward, we’ll use the following property recently sold on Zillow as an example:

Zillow listing as of November 2021

Let’s get started!

1. Indicate Property Information

The first step is creating a report title, adding the property address (city, state, and zip code), annual property taxes, and the MLS number (if applicable). Aside from the MLS number, all of this information should be available on the Zillow listing already.

If you want to go the extra mile, you can also add a photo of the property and a sales description to help organize your reports. The calculator also has a section to input the number of bedrooms, bathrooms, property type, and other specific details.

Based on the listing and available information on Zillow, here’s how it’ll look like in the calculator:

Source: BiggerPockets

Plug those data in, and let’s move on to the next step.

2. Add Purchase Information

Next, you must input the purchase price and after repair value (ARV). You can also enter the purchase closing costs (including all fees associated with the transaction) and estimated repair cost (ERC), either as total values or with a cost breakdown:

Source: BiggerPockets

If you're not sure what your closing costs are, use the standard 1.5% of the purchase price to begin.

But since we’re using a property that’s already sold, we’ve put the said $13,038 closing costs in the calculator. The same goes for the after repair value (ARV) which we’ve used the Zestimate amount, and the estimated repair cost indicated, which is $6,000.

Of course, if this were a new listing, you’ll have to show the property to a professional inspector to get an accurate estimation of the renovation cost.

Purchase Loan Details

Then, add the details of your loan if you’re not paying in cash.

Put your loan interest rate, loan fees, and points, indication if the loan interests only, and if you’ll use Private Mortgage Insurance. Then add the amortized years, how many months before you’ll refinance, and the estimated rehab time.

If you are going to get a loan, this is what it’ll look like on the calculator:

Source: BiggerPockets

However, since the sample property we have here is pretty affordable, let’s say that we’ll pay in cash. Check the little box at the top of the list and skip to the number of months before refinancing and the estimated rehab time.

Based on experience, the average refinancing period takes around 30 to 45 days. However, the lead time also depends on the time you’ll have to wait for the seasoning period—ranging from 6 to 12 months.

As mentioned earlier, we can’t precisely know how many months the rehab will take without a professional inspection. The process can take anywhere from 6 weeks to 6 months, depending on the property’s condition. But let’s just eyeball it and put 1 month, since the home is in favorable conditions.

Refinance Loan Details

The last part of this section is to put the details of your refinance loan. When using the BRRRR method, you want to refinance into a long-term loan as soon as possible. This second loan is usually a fixed-rate mortgage from a bank or credit union, as you can observe below:

Source: BiggerPockets

Most banks will lend 70% of the ARV. Since our sample property is worth $151,700 after it’s renovated, a bank will likely lend a maximum of $106,190. We used this amount for a standard 30-year fixed-rate loan for a primary residence at a 3.5% interest rate.

3. Detail Rental Information

As part of the BRRRR method, you’ll want to rent out the property and start making money as soon as possible. Doing so makes it much easier to refinance the property than if it’s sitting vacant.

So, put in the gross monthly rent you expect to generate from the property. According to Zillow, the Rent Zestimate is $1,399per month. This is the only information required by the calculator, but I suggest that you add as many details as you can for a thorough analysis.

Source: BiggerPockets

Now, most landlords will push most of these expenses to their tenants of a single-family rental home. So the final cost may be much lower than what we’ve indicated above. Still, we’ve estimated the costs for the purpose of analysis.

We’ve used the average vacancy of 10% in Metro Detroit, Michigan, and the average maintenance budget of $1 per square foot of livable space, annually. Also, take note that both rent and the property value will increase by 5% per year on average. Then we added 10% for management fees (if you’re hiring a property management company) and 9% for sales expenses, including marketing to promote the listing.

4. Generate the Results

Lock in the information and generate the results! You’ll see a summary of all the details you’ve provided, financial analysis over time, and more estimations on cash flow and equity gains. Don’t forget that you can also print all of the information so you have them on hand at all times.

Here’s a sample of what it’ll look like:

Source: BiggerPockets

Source: BiggerPockets

Now, don’t forget that you can always go back to the report and change your answers. For example, if you realize that the cost of bringing the rental up to par actually costs only a few hundred bucks, just tap the “Edit Report” button, update the information, and repeat the analysis.

Keep in mind that each reanalysis you generate counts as one report. Since you can only generate 5 reports with a free account, ensure that you make every analysis count!

Summary

One of the hardest parts of real estate investing is crunching the numbers. With calculators like these, however, you won’t have to do them manually. You can avoid all the hassle and possible human error by using BiggerPockets’ digital tools—making it easy to identify the best investment opportunities.

Using this calculator, you can take advantage of the BRRRR method easily and grow your portfolio without tying yourself up to large amounts of cash for a long period—expelling far less cash than with the traditional investment strategy.

Once you’ve utilized cash-out refinancing, you can extract your money and reinvest it in another property. You’ll have all the benefits of a long-term mortgage with only a small amount of money invested. Moreover, you’ll own a rental—giving you multiple tax deduction advantages and consistent cash flow.

So, use this calculator to determine the potential of your prospective investment and identify the areas of improvement that will make it an ideal plan. Increase your net worth, create passive income, and move towards financial independence in a continuous manner.

Best of luck to you!

Have you encountered problems using BiggerPockets’ tools? Drop a comment below, and we’ll help you out as soon as possible.

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