Is the BRRR right for my situation
I would first like to say that I am totally a noobie to real estate investing but I have came across BP and am amazed by the wealth of knowledge and people helping each other out...I have a question about the BRRR strategy and would like any input you guys have to offer...first of all I am looking to purchase
my first rental property but don't have a lotta cash. There's a property for sale that is a triplex which is already fully occupied and the total rental income is 1075 monthly...the seller wants 50k for it but I would like to purchase it cash, if I were somehow able to buy it for 30k cash, would this be a good property to use the BRRR model on to get my cash back and get onto the next property...the value of the house is around 55k...any thoughts and input is more than welcomed
This seems like a good deal, and covers the 2% rule which means it should cash flow (should). But to the BRRR strategy:
1) Assuming the ARV is 55k, at a 75% Loan to Value LTV, your 'cash out' would be at about 41.25K.
2) At a purchase price of 30k you'd then have a rehab budget of about 11K
So, this would be a good BRRR model if you purchase at 30k and estimate that the rehab would be under 11k. That's just a simple filter for it, this doesn't include fees such as the closing costs which you'd need to consider. IMO you should have a larger spread than that, especially since this is your first investment, so if the ARV came closer to something like 80K, it'd give you room to make mistakes and pull out more cash on the refinance end (assuming you are able to buy at 30k). Hope this helps.
Plug it into the calculator and take a look. https://www.biggerpockets.com/brrrr-calculator
Remember that on the refinance at most you'll get 80% LTV, but most likely 70% when doing cash out. So if the after repair appraised value is going to be $55k, at most the bank will loan you is $38,500 if you're pulling out cash, or $44k if you're not. If you're buying for $30k and not putting in more than $8500 of repairs, you can get all your money out.
But if you're buying it using your own cash, then dive into the forums and read up on delayed financing. You can buy with cash, then put the financing in place shortly after and that'll give you your cash back.
Thanks for the input I will definitely use the calculator to get a better picture and come back and update you guys