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Gather Your Inputs
First, identify the key inputs: Purchase Price, Rehab Costs, Refinance Amount, Outstanding Loan Balance, and Closing Costs. For example, let's say the Purchase Price is $100,000, Rehab Costs are $20,000, Refinance Amount is $150,000, Outstanding Loan Balance is $80,000, and Closing Costs are $5,000.
Calculate Cash-Out Proceeds
Next, plug in the numbers into the formula: Cash-Out Proceeds = Refinance Amount - Outstanding Loan Balance - Closing Costs. Using our example, Cash-Out Proceeds = $150,000 - $80,000 - $5,000 = $65,000.
Calculate Equity Retained
Now, calculate Equity Retained using the formula: Equity Retained = Refinance Amount - Cash-Out Proceeds - Rehab Costs - Purchase Price. Using our example, Equity Retained = $150,000 - $65,000 - $20,000 - $100,000 = - $35,000. Note that a negative Equity Retained value indicates that the investor has not retained any equity in the property.
Avoid Common Mistakes
When calculating BRRRR returns, be sure to avoid common mistakes such as forgetting to include Closing Costs or using the wrong Refinance Amount. Double-check your inputs and calculations to ensure accuracy.
Use the Calculator for Convenience
While manual calculation is possible, using a BRRRR calculator can save time and reduce errors. The calculator can also provide additional insights, such as cash flow and return on investment (ROI) analysis. Use the calculator to streamline your calculations and focus on higher-level investment decisions.
Review and Refine Your Calculation
Finally, review your calculation to ensure accuracy and refine your inputs as needed. Consider sensitivity analysis to test how changes in inputs affect your results. By following these steps and using the BRRRR calculator, you'll be able to make informed investment decisions and optimize your real estate portfolio.
Introduction to BRRRR Calculator
The BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy is a popular real estate investment approach. To calculate the returns on a BRRRR investment, you'll need to follow a series of steps. In this guide, we'll walk you through the manual calculation process.
Understanding the Formula
The BRRRR calculator uses the following formula to determine cash-out proceeds and equity retained: Cash-Out Proceeds = Refinance Amount - Outstanding Loan Balance - Closing Costs Equity Retained = Refinance Amount - Cash-Out Proceeds - Rehab Costs - Purchase Price
Step-by-Step Calculation
To calculate BRRRR returns manually, follow these steps:
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