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.biggerpock...
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
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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 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
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. ????
@@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
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 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 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.
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?
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
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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.
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!
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!😄
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 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
@@Rbdr1111 I would disagree, when your starting you have to watch and pinch every penny- at least i did. "$40 is nothing for education and tools" I would argue is incorrect methodology. working on my 12th door. never spent money on such tools. started 6 years ago with 40K (avg. purchase price in my area is 260K) not trying to call anyone out, just depends on who you are and where your mining from. happy hunting
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.
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.
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
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.
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?
Amazing how people could complain about paying $40 a month to have access to tools like this. $480 a year. If you got just ONE deal by using this tool, the return on investment is better than the actual deal itself 😂
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!
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.
Hi Brandon, I’m following your RU-vid 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.
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
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.
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!
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.
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
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.
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.
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.
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
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.
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?
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 :)
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?
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.
