How to Analyze a Fix-and-Rent Property | BiggerPockets BRRRR Calc
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- Опубліковано 12 чер 2016
- In this video, Brandon walks you - step by step - through his analysis of his most-recent investment property, a fourplex that needs nearly $100,000 of rehab. Read the whole story on the BiggerPockets Blog - www.biggerpockets.com/renewsb...
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You're right about people wanting to turn it off when things get hard... 2 weeks ago I was listening to a podcast every day and then the following week I didn't do anything due to being overwhelmed with how to continue.
Brandon, wish you could make a follow-up video, showing how this deal actually turned out. It would be educational to compare the numbers on paper and in practice. Thanks.
Ashfaq Sheikh I agree. Would be good to see actual vs budgeted with these types of properties and rentals too. That way we can see if budgets were overly optimistic or not
Seriously. Everyone sells investing on paper. Would love for real world information
If you guys actually stayed until the end of the video you would see that he does actually tell you how that property ended up working for him.
i think now he has about a 1000 monthly cashflow on this 1
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Well done Brandon! You're a good teacher, showing a solid tool!
Bob is certainly a shrewd negotiator.
Brendan, thanks for the video your calculators are great tools.
These videos are life changing.
I just watched a more recent video that shows the finished result and actually walks thru the property, he did a fantastic rehab but ended up under estimating the rehab cost. Actually it never made sense to me why he changed the rehab cost in his initial estimate just because purchased the property at a lower price.
I'm convinced--Brandon, you're working for me now! :)
Thanks for sharing your knowledge...very informative.
Lots of value. Great video!
Watching 2020 great stuff mate.
How do you earn 2650/month while in the acquisition stage if you’re doing work on the units?
Priceless as always! Thank you for all your effort!
i purchase 2 beat up mobile homes with land, 1st for 20k+3k repairs, 2nd 19.5k+ 7k repairs , tax,insurance and mortgage per month $565 rent collected $1,450
where did you do this at?
Love the video and content, thanks for posting! Where is the Acquisition down payment surplus (100K and 85K) numbers being pulled from if your financing 100% in both purchase examples?
Hi. Awesome video. Very informative. Does this calculator only work for the US or internationally as well?
Awesome info as usual!! Love it Brandon!!
Great video! Thanks for the information
So much knowledge from this channel, i just wish i could find a deal in my area 😤
Stay motivated
Great video... quick question: How many months the rehab did take? Before it was rented...
Brandon, Do you have a webinar on using this calculator. I learned the buy and hold rental calculator through a webinar and you went through it very thoroughly. I need more info than is in this video. I have read David Green's BRRRR book and am still left with questions on estimating rehab costs (working on that book) and figuring out ARV. Please advise if you can. Thank you!
So lucky to be your daughter:) thanks for the video!!! Would you care to do one video in case you could not pay for the loan? worst case as possible as 2008-2009? How to deal with these kinds of worst case? Thanks a lot!
Great overview of the BRRRR calculator!
Great video! I'm a bit confused about the acquisition details. It says you'd have a monthly income of $2645 during that first year before refinancing. How? You wouldn't be able to have tenants living there while you're rehabbing it. How quickly would you be able to rehab a property like that?
I was thinking about the same!
@@performance.marketingyes they are ok in fact I think they prefer it so they can get their money back and put it elsewhere
Awesome! So good, so good!
Great video
Great calculators.
If the property needs that much rehab, how is it that you still have $2645 in rent coming in during the acquisition/reno period? Wouldn't the units be empty during that time? I would think your cash flow during the reno period would be way negative. ????
Good catch. You are definitely correct.
And you need to kick out all the tenants. Prepare for eviction fees. On paper (calculator) everything goes really smooth.
and a 0% down payment i find a little unrealistic
Would make sense if he added $2645x12 to the loan, but that would screw his roi.
@@mikelamm732 you dont have down payments with private lenders. That's like if you borrowed 20 bucks from your mom but had to give her 2 bucks first. Never heard of that, lol
I was just trying to play with it to see if i can understand it a little better. I am going to just keep playing with it and tried to figure it out.. Quick question is the calculator still in beta testing if yes when is the estimated date to have it 100% accurate with no more testing? Curious , but will continue to try to get familiar with it.
Sick fuckin product!! I'm starting an investment firm, and you help tremendously. I'm most certainly becoming a member of BP. Thanks a lot guys, seriously. I'm really changing my life!
This video finally made me understand brrr
Brandon, does this theory also work for buying a an empty 1/4 acre and the doing the BRRR calculation?
Does the Brrrr process works on foreclose/auction?
Do you calculate carrying cost and how to you pay them until you refinance
What a great tool!
Thanks I love the video and Information. 😊😉💪💪💪🤝
How are you calculating the total cash invested on the Refinance portion? I’ve ran a few scenarios through the calculator and they don’t seem to add up.
Incredible
Excellent
Hi Brandon. Not having the 20% down-payment for the Acquisition loan makes a huge difference here. Can you please explain how you get the Acquisition loan with no money down? Thanks!
Dear Brandon
While you get that repair work of a huge 80,000, done, you cannot rent the property, is it still a profitable deal (as the vacancy cost must have increased). Pls explain.
Thanks
PS: just noticed, it was posted on my bday!😄
its confusing that you like to have equity up front but its not your cash because it is the 30k from the LOC. Also that you can say that you only put 3k into the deal which makes your cash on cash awesome! I understand it is just something that got me thinking! AWESOME video tho!
Seems like a pretty sweet deal, but only if you have negative 700 dollars to spend.
How do you have monthly cashflow during the rehab phase if you have no tenants?
Hi, how come it does not mention about the carrying costs during the rehab?
What if you buying with tenant under lease and you can't rehab ARV for refinance
Amazing
Why did the repair cost go down? Wouldn't that stay the same regardless of purchase price?
It was the “new ruff” for me
I’m confused about something. How do you pay back the loans from the bank and private lender?
thanks for your video and I want to know how do you know exactly what the value after you repair and renovated the property? and how do you know the monthly income before you buy it, which means how to define what the price can I rent it out and the price of the house after I repair it, cause if you have the wrong number the results will be different.
梁盛楠 You would have to run a Comparative Market Analysis for similar properties like his after its fixed up. A realtor can do that for him.
you can look at the features that the property has, then enter the beds # & baths # into rentometer.com to get some comparable rent information (better to check with local property management company, but this you can do on your own).
Check Homewyse.com to find repair costs in your area
I have a question about the BRRRR strategy that I have yet to figure out. Why do I need a private lender to buy an investment when I could just get a proposed appraisal on the property and just get a bank to loan me the money that way. Will the banks not loan on a property that needs significant rehab with a proposed appraisal or something? Plz help if anyone knows.
The catch is you need to be a bigger pockets pro member?
how did you pay for financing without tenants?
How do you convince banks to pay for your rehab?
I may have missed something but It doesn't appear this calculations factors in not having tenants during the rehab period. Does this factor in carrying costs?
I was just about make the same comment Edward. There would be less or no rental income during the rehab phase (depending on how many units are rehabbed) so cashflow would definitely be negative or low before the refinance. I would want to know this before deciding on a purchase price and initial loan amount. Otherwise, the calculator looks like a good tool. Good job Brandon/Bigger Pockets!
I guess during the rehab phase, the investor has to absorb the loss of no rental income and high interest rate. Hence, one should have some extra money handy. But in the end, it works out well.
Yes, the calculator does seem to account for that. The tab labeled "Rehab" shows a carrying cost figure (meaning the cost to you to have the property with no tenants in it). The impact of this also shows in the year-by-year figures. In Yr 1, the annual income figure is lower than it is in subsequent years.
GBSheridan if he had no renters there would be no monthly income
GBSheridan so there would be no income for the first year. It wouldn’t be “lower” it would be non existent.
Hi Brandon, I’m following your UA-cam channel from sometime now and even bought your book. The trouble with me applying all your strategies is I live in Vancouver, where real estate is damn expensive. Even a 2 bedroom condo in the suburbs cost more than 400K. Now, I and my friend still started investing in real estate and we have 3 properties ( 2 single family and one condo) on top of our personal houses. We already have 3 mortgages all together and kind of maxed on the money we can borrow more at least from an A lender. All together we have around 2Million worth of mortgage including our personal houses. This number seems high as a single family home here is at least 700/K. So we are kind of stuck here as we cannot buy more. Also, we don’t want to sell our existing properties as market is little bit down these days. Can you guide me how the heck people can have 50 or 100 units in a market like Vancouver. Any insight here would be greatly appreciated. Hope you can find this scenario worth answering.
Bad time to buy in Vancouver its going to only go down from here reset value will be lower than you paid . you will see.
the markets dead, so soon this could become reality in B.C.PRAISE THE LORD. SORRY FOR YOUR LOSS.
how are you refinancing for lower than the original financed amount? i'm so confused
How do you calculate after repair rental value?
Mannnn this guy selling the 4plex must have been HIGHLY motivated to sell! Lol for $45k from $80k that’s damn near a 50% reduction in asking price
It was probably severely trashed considering it needed 80-100k in reno.
He talks about the negotiations, and how they came to that amount. I would recommend watching and listening to the entire video
what about the vacancy factor and maintenance?
does this calculator allow you to use it to do the math on a home to see if it cashflows or is it specifically only for multi family and fix up property types? When I use the calculator it forces to make me do the refinancing it would be nice to have the option of not having to do the refinancing. love that the calculator does calculate with the refinance it would just also be nice to skip that part if your just trying to do the math on a house just to see if it cashflows right off the bat. Thank you sorry for so many questions.
There is another calculator for strict buy and hold rental. This is specifically for refinance projects.
So if the market goes up before the refi and it is valued at about $200k then you just made a huge income?
Those would sell for $400k each where I live ($1.6 million total) and would get you a rent of about $2000 per unit. I can see why real estate seems to be the answer for Americans who wants to get started, but it is really not in more expensive countries.
What if, instead of getting the whole loan from a hard money lender, you paid the 20% down and we’re financed through a local bank but you had a hard money lender to pay for the renovation? How would you apply that to this calculator?
They wont finance it. He discusses that throughout
Banks won't finance a distressed property. But if perhaps you're doing a very small amount of rehab, and could get it bank-financed, you would choose the "Amortized Loan" rather than "Interest only" loan
Where are you getting back/refinancing the 180k to pay back the initial PML?
The most difficult part of RE investing is getting the money in the correct way and be able to afford the payment. Moving around funds and getting financing from lenders is really the majority of the headache
I’m sorry, did you put 0 percent down on the private lender ??
BRANDON...I NEED TO SEE YOUR ENDORSEMENT OF TURNKEY COMPANIES...TX GEORGE FROM LAS VEGAS
Question: I am moving from the UK where it is typical that the tenants are responsible for all utilities (and we have something called Council Tax). Moving to Houston to invest in single family residential, and curious is it common for the landlord to include these fees in their rental calculations or his the tenant normally responsible in most scenarios? Really appreciate any answers :)
JD Cooksey g
TY 😃
Brandon, are you borrowing a little more from the hard money lender than you really need in order to pay 12% interest payments during rehab? I bet you could fudge the numbers in that case.
$984 in annual property taxes oh my god. In New York state a 150k house has property taxes over 5k
Watching in 2021
VERY DOPE BREAKDOWN...i am a human sponge
Hi, is this calculator also applicable in the Philippines?
Watching this in 2021
Hello in the first scenario 180 k private lender payoff is part of the 58k total cash outlay refinance plus cash to pay it off correct you don’t really go over that
Hi Bradon, I dont get the idea of refinancing the property after you all ready payed off the loan after 18 years... I’m from Belgium. Maybe it’s an other system in America? Why should the bank loan you again if you allready payed your debt?
In this case you have 3 vacant units during rehab, a lot of people don't have a few grand just lying around. You're looking at least a few months of just one unit producing any cashflow, so probably needing around $5-$6k in holding costs over that time.
What would you suggest for someone who doesn't have that extra cash on hand to cover the interest until all 4 units are rehabbed/rented?
Joshua DeMille borrow more
IF you're borrowing money to begin with, yes.
You said the Property Taxes are $984 per month???
can renovations on a rental property increase the amount of rent you are able to charge? or at least renovate it and get it appraised for more. That should allow you to have more equity in the house right? if so can you use that to reduce your loan amount?
Sean Paulson single family swings very little when compared to the local market. it's very dependent on size and beds more than granite and nice roof. that's where refinance or sale comes in.
nbookie n
This does not work for smaller rural areas. I live in harrison ar, and I get "not enough results in that location" every time.
Question. Is he paying the hard money lender 10% per month or annual. He said it was a interest only and his payment was $1800 monthly.
annually silly
'gotta learn that math, man.
Is this considered a brrrr strategy or just a brrr strategy? It seems the repeat part will be difficult to do because you are not taking any additional cash out on the refinance, correct? I know you have other properties cash flowing enough to get another investment property, but would this property be a wise decision for someones first property considering you wouldn't be getting any cash out of the property on the refinance to purchase another property?
The refinance just gets cash out to pay his HM and bank loans. He didn't put his cash into this investment. Only used cash to cover holding costs and HM interest payments. Then he gets a property with $50k equity and enough pure cash flow to reimburse his holding costs after 1.5 yrs or so.
Shouldn't there be a field that estimates how many months you're paying in mortgage before you get actual tenants in there?
Factoring in the time it takes to renovate and then find tenants. I would think that is overhead worth factoring into your estimates.
Does anyone know why the repairs went from 100k to 80k all of a sudden?
A fourplex for 45,000!! Come to vancouver island. You couldn't touch a fourplex for under $800,000. Would rent out for 4800 a month though
When the ARV goes up, wouldn't the property tax follow suit?
Ashfaq Sheikh - he should use tax rate instead of amt to makes it realistic
Not always. You would have to get a new appraisal and then it would have to get back to the city for assessment
In which case they may not even adjust it, especially if it was only cosmetic upgrades. You almost hope that the assessed value goes up in case you want to sell...easier for buyers to get full financing and come to the table with less money
Does your system work for properties in Canada?
Hmn
How would that even work? Refinancing for 57k less than your original hard money loan. Isn't the point to pay off the hard money with the refinance?
Was wondering the same thing.
Nick Fleming he said that was what showed that the original deal would be a bad one. He then offer a lower amount and reassessed the rehab amount and got it to numbers that worked.
That's why the original deal said that he had 58k of his own money invested. He had to spend to close out with the HML when he got his new mortgage.
Cody - I was thinking the same thing....but he never really said that I dont think
I agree with this question--You'd need to fully close out the expensive loan with the longer-term, less expensive loan--so how do you close that gap?
If you can pay it off in 18 years why would you refinance, is that just so you can draw from the equity? Would it be better to just bank the $544 over 18 years and have the $117k to use for collage and still have no mortgage payment? Just curious.
that would be another strategy, but remember, you dont have to pay taxes on the equity you pulled out, vs, paying taxes on the interest earned.
“Annual property tax,” yet you say you inserted the monthly property tax at 2:35
I’m gonna is it the day you get to work jlkg
I cant buy a piece of dirt for 80k dollars here in MA. Can you do an example of this using real numbers like 200k or 300k
chachee15 I'm in MA too, I've seen triplex fix ups for as low as 40k, we can't be scared to purchase something an hour or two away. From one end of ma to the other is only like 3-3 1/2 hours.. so I look everywhere in ma.
Add a extra zero. Why does the number matter?
hello Brandon can you help me figure out my cap rate on my property i have a 4 unit property the gross income is 52,500 , the noi is 37,700 , the purchase price was 135,000 how do i figure out the cap rate ? thanks
Where are you investing?
i have one house that is left from my granparents... it costs 5000$ how can i invest or take advantage of it but not to sell?
rent it out
Yup. I'm gonna be wealthy. Thank you. Easy as 1 2 3
Where can I go 'in the real world " to surround myself with people who are interested in this. I'd like to possibly start out in a job doing something exposing myself to these types of concepts in order to learn it in order to do it for myself. Does anyone have any advice for me
Look up local Real Estate Investor Associations or meet ups and depending on where you live. They typically have them in the major/smaller cities in the USA.
I still really don't understand the concept of re-financing 😔 ... can someone on here elaborate ?
Purely from this video, what I can tell is that a "refinanced loan" means a loan that is for 70% of the property value. Which explains why you can't purely use a refinanced loan to buy the property in the first place. Apparently loans for 100% of the property value have a higher interest rate than these loans. It's been 3 weeks since your comment. Hoping this makes it more likely that someone who knows what they're talking about will engage in helpful dialogue.
How I understand it: you get a private loan for 70 % of the value of the unit. If after repair value is 100k they give you 70k. After you repair the unit you refinance the property from a bank. Let’s say the bank gives you 100% (100k), you then use that money to pay the 70k.
The point is you have to get the unit for less than it is worth so you can build equity after it has been repaired.
After you refinance and convert it to a “30” years mortgage, it becomes easier to pay. Hard money short term, refinance for long term.
The bank will refinance something you already have easier than giving you a new loan. Also the bank will give you a better and lower interest.
Buy with cash or hard money and fix it up. After its fixed up its worth 100k. If you were to go find a rental property to buy on your own for 100k and had to put a 30% down payment then the bank would loan you 70k. this is why you try to buy and rehab and be in this deal for 70k or under. So you get a loan the same way if you were buying a finished house essentially. Except with the BRRR you are using the equity you would get if you sold it like a flip as your down payment without paying taxes on it.... If that doesn't make sense the keep watching videos... you have some learning to do.
Jonathan Ruiz: The refi is going to bring the interest rate down from a 12% interest only loan to 5.5% conventional loan. In this case he does it after 1 year. This will decrease your monthly mortgage and save you money in the long run.
Im confused on this first analysis. If the purchase of the property is 80K and the rehab is 100K thats a total of 180k. Then he gets it refinanced at 130k. How did he not lose 50k? thank you
How is he pulling cash out to fund the next one?