BRRR Analysis in Philadelphia: Help with numbers, please!

5 Replies

Hi everyone,

I'm still in the research phase of my BRRR strategy and just getting estimates to see if I understand the numbers. My main issue that I come across a lot is that I never know how to estimate rehab cost, whether it's a gut renovation or just cosmetics. Can someone assist me with that or provide insight?

I am using "657 N 41st St Philadelphia, PA, 19104" as a first model. I am gauging that the ARV is $250k and I keep with the purchase price at $120k. If I incorporate a hard money lender, I am estimating they will loan me 65% of purchase price and and 95% of rehab costs, with 2 points on the loan for 12 month period (I got these numbers off a hard money lender at a presentation). Based off rentometer, I will also say rent is $1500 to 1700/mo.

This is as far as I got building the model so still need to incorporate the refinancing portion, taxes, vacancy, repairs, property management... so please let me know if there is anything I should also taken into account or if any assumption is already wrong. Greatful for any help necessary. 


Thanks! 

Cindy

@Cindy Truong - Some other costs that you might want to keep in mind when running numbers for a BRRR on this type of house:

Purchase closing costs - Can be high in Philadelphia because of transfer taxes.

Holding costs - In addition to interest you are paying your hard money lender, before your tenant moves in and starts paying most or all of the utilities, you will need to pay them. This is mostly electric, gas, and water.

Closing costs when you refinance into a long term loan - Refinancing at the end of the BRRR will also result in some fees, and this depends on the type of loan you get.

Good luck with your search and your BRRRR - feel free to reach out with any questions

Hi Cindy. There may be some slick people on BP with a formula for you to calculate rehab cost, but to be safe you should really get a GC or two in there to assess the situation and provide you feedback on potential costs. 

@Cindy Truong - With the property that you mentioned above, there is no pictures of the inside, but the description says that it is a shell with no access to the inside. So you need to determine what it will cost to do a full gut rehab of a property. I would suggest networking with individuals who have experience doing these types of renovations. Walk the properties with them, and see how they estimate the cost of rehab. That way you can at least come up with some sort of ballpark for rehab costs when analyzing potential BRRR properties. Your local REIA meetups may be the best place to meet people with experience renovating homes. Also - check out J Scotts books on Estimating Rehab Costs.

hi @Cindy Truong
how are you. I provide a presentation on mortgage lending on behalf of HAPCO the landlord association in Philadelphia and we cover the BRRRR Strategy in detail. Let me know if you would like to attend the upcoming events or discuss Regards Joe