Underwrite
Rehab cost vs rental return
Value-add only works if the rent (or ARV) lift pays for the work. Enter as-is rent/price, rehab budget, after-repair rent (and optional ARV), then financing; see incremental cash flow, CoC on total cash in, and a simple "rent lift per rehab dollar" read. Pairs with BRRRR when a refi is part of the plan.
Assumptions
Returns stack
- Rent lift / mo
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- Rehab efficiency
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- Monthly CF (after)
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- CoC on cash in
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When to use
Before greenlighting a kitchen; comparing light cosmetic vs heavy rehab; checking a contractor change order against rent upside.
When not to
Contractor overruns are the default, not the exception. And after-repair rent must match the finish level you paid for.
Assumptions: All-in = purchase + rehab + closing/hold (cash). Stabilized NOI/CF/CoC on after-repair rent. Rehab efficiency ≈ annual rent lift ÷ rehab cost. Not a contractor bid tool or AVM.
Worked examples
Input
$25k rehab +$300/mo rent
Output
+$3,600/yr gross vs $25k cost
Judge after OpEx and debt - gross lift is not profit.
Input
Big rehab · tiny rent lift
Output
CoC collapses
Heavy spend without lasting rent bump kills value-add math.
Common traps
- Contractor overruns are the default, not the exception.
- After-repair rent must match the finish level you paid for.
- Not a contractor bid tool or AVM.