Assumed zero cash back on a triplex BRRRR. It returned 21%.

Posting the numbers because the thing that made this work was a modeling choice, not a market call.

1920s triplex, two ones over a two one, in a streetcar suburb of a mid sized midwest city. Bought at 214k, all three units occupied at 725, 750 and 810, badly under market and month to month. Bridge loan 186k at 11% interest only, 12 month term.

Rehab 67k actual against 62k budget. Kitchens and baths in two units, one full electrical panel and rewire on the third floor, and separating the water heaters. Carry and closing 14k. All in 295k, my cash 109k.

Rents after turn: 1,150, 1,175 and 1,320. That's 3,645 gross against 2,285 before.

When I underwrote it in the sheet, the base case was zero cash returned at refinance. I required the property to hit a 1.25 DSCR and 375 a month of cash flow after a 7% vacancy and 250 a month of reserves with the entire 109k left in. If it cleared that, I'd buy it and treat any refi proceeds as a bonus. That's the only reason I wasn't sweating in month nine.

Appraisal came in at 386k against my 380k estimate. Refi at 70% is 270,200. Payoff 186k, refi costs 9,400, so I got back 74,800? No. Payoff was 186k plus 8,200 of accrued interest and an extension fee, so 194,200, and I netted 66,600 against 109k in. That's 61% recovery, and the 42,400 that stayed in the deal is earning me 430 a month after reserves at a 1.29 DSCR on the lender's math.

What nearly broke it: the bridge lender's 12 month term with a rehab that ran 15 weeks long because of the panel permit. I paid a point for a 90 day extension, 1,860, plus the extra interest. If I'd needed a second extension I think they'd have gotten difficult.

What I'd keep: the zero cash back base case. It kills about eight deals for every one it approves, and the one it approves doesn't depend on the appraiser having a good day.

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2monica_tran3SF4CPRO6

The permit delay is the part I'd push on, because that's where this stops being a modeling choice and starts being luck with a municipality. You got one 90 day extension at a point. What was your plan at day 91 of that extension if the panel inspection had slipped again? That's the scenario where a deal that pencils at 1.29 turns into a forced sale, and I don't see it in the base case anywhere.

Also curious what happens to your 430 a month if the appraisal had landed at 355 instead of 386. Loan drops to about 248,500, you net roughly 45k instead of 66,600, so 64k stays in. Cash flow goes up because the debt's smaller, so the property is fine, and you just don't get to buy the next one for another two years. Which I think proves your point rather than dents it, but I'd want to see the pace assumption written down too, since the whole recycle idea lives or dies on it.

Assumed zero cash back on a triplex BRRRR. It returned 21%.

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