How to Analyze a BRRRR Deal

Calculate acquisition costs, rehab budget, long-term returns for BRRRR’s
Written by Lisa Greene
Updated 3 months ago

In this article:

Adding property details
Viewing rental property analysis report
 

BRRRR stands for buy, rehab, rent, refinance & repeat, and is a popular investment strategy among investors that can help you minimize the capital invested in each property.

Unlike more traditional rental property purchases, the BRRRR strategy involves using a short-term loan (typically and interest-only, hard-money loan) to finance the acquisition and rehab of the property, then refinancing into an amortizing long-term loan after the rehab is complete.

This guide will show you how to use Zilculator to analyze your BRRRR deal.

Adding property details

1.  Create a new property

Navigate to the Properties page and click the “New Property” button.

For a BRRRR deal we will use our rental property form, which is created as an easy-to-use, step-by-step wizard and has four sections: Property information, Purchase information, Rental information, and Resale information. Next, we will cover each step separately.

Select the Rental property option as an investment strategy, if it’s not already selected.

2.  Add or load basic property information

In the first step of the property wizard, you can either copy an existing property, load property details from MLS®, or enter property details on your own. In this guide, we’ll add details manually, but you can click on the links above to learn more about the other options.

Next, add details about the property, including a report title, property type, address, and photos. Make sure to fill in the required fields with an orange border, such as a full address. 

Note: For properties located in the US, Zilculator will automatically search and attempt to load details from public records and Zillow® after you input the property address.

These are the most important fields to fill in:

  • Private checkbox: By default, all property reports are public. You can share them online and Google can search and access them. A private report is accessible only to its author.
  • Report title: This will be the name of the property used throughout our app. If left blank, a property address is used by default. You can, however, use more descriptive names, like "3/1 SFR in North Topeka".
  • Address: Zilculator’s integration with Google Maps makes it easier to input an address. Start typing and, then, select the correct address from the drop-down menu. Zilculator will automatically check public records and Zillow® for additional property details. Plus, it will load Streetview photos from Google Maps. If you are analyzing an apartment or condominium, make sure to input a Unit # into Address line 2.
  • Property type: Select one of the available options. Note: Multifamily and Commercial property analysis is only available in the paid plans. If you are analyzing Multifamily or Commercial property, check the additional guide here.
  • More details: Click on the More details button and further facts about the property and Summary info and Description. All these details will make the final report richer and more detailed.
  • Photos: Click to select one or more of the automatically loaded photos or upload your own (drag and drop).

3.  Add the Purchase information

Add details about the price of the property, financing, and rehab/construction costs.

Here is more information about each input field:

  • Purchase price: The amount you are paying or you paid to purchase the property. It’s the only mandatory field.
  • After repair value: The estimated market value of the property after any rehab work is complete. If left blank, the purchase price is considered to be the after-repair value.

Note: Click the Estimate ARV button to open the CMA module that can assist you with figuring out the accurate after repair value using recent sales comps in the area. See a guide on How to calculate accurate After Repair Value to learn more. 

  • Currency: Simply change $ to your currency symbol here. This currency will be used for the entire report.
  • Closing costs: These are all costs and fees associated with purchasing the property, also called purchase costs. Examples include loan points, escrow fees, and property inspection fees. You can enter a total amount, or click the Expand costs button and enter a detailed list of each purchase cost separately.
  • Repair costs: If you are planning to do any up-front rehab work on this property, enter the total or an itemized list of all rehab expenses. Leave this as $0 if the property is already rent-ready.

Typically for a BRRRR deal you will use a short-term financing for less than a year which covers purchase price and rehab. Click Add loan button and add loan details, such as label, loan type, interest rate etc. For the loan term, select 1 year and then click the new button “Refinance after” which appears below.

In the next Refinance loan section add the details of the long-term loan you will be using, as well as the refinance costs you expect to pay.

We have added unique Lender summary section in the final report, which is great for creating funding proposals to private lenders.

 

4.  Enter the Rental Information and Operating Expenses

In this section, you can enter the projected rent you are going to collect from your tenants as well as all operating expenses you are going to have.

Incomes

First, enter an estimated rent per month. Zilculator helps you estimate the rent for the specified address and unit size using Zillow® property data (subjected to availability). You can also add other incomes such as storage unit, coin-laundry, etc. by clicking the Other income button.

Expenses

Next, customize the monthly and yearly recurring expenses. If you are doing a quick analysis, you can simply consider that expenses will take approximately half of the rental income and check the 50% Rule checkbox, or itemize expenses one at a time. You can enter an estimate as a percentage of the gross rent, as an amount paid per month or per year. Click the Unit select box to change this. We load some frequent expenses for you, but you can delete them or add your own by clicking the Other expense button.

Future Capital Expenditures

You might already know that, for example, the roof will have to be replaced in 5 years. Here is the place to add these future capital expenditures or rehab costs. They will be displayed in the final report in the Cash-Flow forecast and will be counted in the overall return of the investment (such as IRR, NPV).

5.  Set Resale Information and Future Assumptions

The final section of the wizard lets you input details about the future resale of the property. They are important for the overall return calculated with IRR and NPV plus the long-term cash flow forecast. You can either set a specific resale price or let Zilculator calculate it using one of the common methods (default is a calculation using Appreciation). Enter the holding period (required, maximum 30 years) and cost of sale as a percentage of the resale price.

If you would like to change the default future assumptions, click the Future assumptions button. This section has several additional inputs and projections you can customize to fine-tune this deal further. These all have default values already set, so you don’t need to edit them in most cases.

  • Appreciation: The anticipated annual increase of the property's market value. This value is important to calculate how the property's value will increase in the future.
  • Rent growth: The anticipated annual increase of the gross rent. In most cases, the property's rent will increase each year, and this is the percentage it will increase by.
  • Expenses growth: The anticipated annual increase of the operating expenses. Expenses will typically rise due to inflation and other factors.
  • Tax rate: Your income tax bracket percentage that is needed for calculation of cash flow after taxes.
  • Discount rate: This is a crucial value for calculation of Net Present Value (see NPV definition to learn more).
  • Land to value: This is a percentage of the appraised value of the land to the purchase price of the property. This number is important for the accurate calculation of depreciation deduction.

 

Viewing rental property analysis report

Now that you have added the property details, you can see the property analysis report. Each report consists of various sections that can be enabled or disabled. We will walk you through the main areas of the report and the options here.

Note: If you have a paid plan, you can add branding (logo, phone number, business address, etc.) to your reports. Learn more about adding branding here.

At the top of the report, you will see the following menu:

  • Edit: This option will bring you back to the property form where you can change all of the property details.
  • Presets: You can select one of the predefined versions of the report: Summary report, Marketing report, Full report, and Lender report. You can also customize the report by toggling the sections you want hidden.
  • Preview: Click the Preview button to see the report as others will see it.
  • Save: It’s necessary to save the report if you have toggled or edited any sections.
  • Share: You can easily share your report with buyers or other investors. The options are to: send an email through our service, copy a link to paste it in your emails or forums, share on Facebook, Twitter, or LinkedIn.
  • Download a PDF report: Generate a professional PDF report that you can share with your lender, buyers or investors. It takes a few seconds to generate and download. Make your report professional by adding your branding or removing Zilculator’s logo (contact us for pricing).
  • Publish your report: With a paid membership, you can publish your report to our public Marketplace and also to your Property inventory page (Premium feature). First, select the Deal status (Active, Under Contract, Pending, Sold, or Other) and click Publish

The comprehensive rental report (see the full demo report here) consists of 11 sections that can be made hidden or visible by clicking the appropriate toggle button.

  

The following is the list of all sections with a short description for each:

  • Executive Summary: highlights the most important metrics, ratios, and rental data together with a photo slider.
  • Property Description: shows the longer description field and further property details and a map. Property listing history and Rent breakdown by units/apartments are displayed here as well, when available.
  • Sales History: lets you load the sales history of the property and owner’s information, such as name, address, and mortgages (subjected to availability).
  • Comparative Market Analysis: displays selected comparable sales. Click Add comps to load the CMA module. Learn more about how to load comps and create a CMA.
  • Rehab Estimates: if you broke down the repair costs into categories in the property form, an easy-to-read table of repair costs will be displayed.
  • Operating Analysis: shows annual operating data (APOD), cash flow calculation, operating ratios all for the first year of operation.
  • Financial Analysis: shows financial measures and investment return ratios, such as Net Present Value, Internal Rate of Return, Cash on Cash return, Capitalization Rate, etc. Only NPV, IRR and Profitability Index are taken into account for all the future cash flows, including the resale of the property. The rest of the ratios are by definition calculated only for the first year of operation. Learn more about real estate metrics and their definitions.
  • Financing Overview: if you have selected financing for the deal, this section will show details of each loan, calculated monthly payments and a Cumulative equity chart.
  • Long-term Cash Flow Forecast: displays projected incomes, expenses, mortgage payments, future capital expenditures, cash flow before and after taxes for all the years of the holding period. Scroll the data table left and right to view information for additional years.
  • Resale Analysis: shows calculations of Resale price with a few available methods, Net assets, and Yield.
  • Lender Report: shows a summary of each loan from the Lender’s perspective, including the Lender income and return on investment. This section is great for Private lender funding proposals.
  • Photos

Note: Hover over the underlined terms to view their description in a popover.

 

What's next?

Once you have added your property, you can find it on your Properties page. Here are more things you can do with our software:

  • Analyze a Multifamily or Commercial rental property
  • Duplicate this property to calculate alternative investment scenarios
  • Compare this property to other properties you added or alternative investment scenarios
  • Analyze a fix and flip property
  • Analyze a wholesale property
  • View recent sales comps and add a Comparative Market Analysis to your report
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