Looking to BRRR a local deal. What Should I Consider?

7 Replies

Hey, all -

I've done a preliminary search, but I don't have a ton of time to sift through everything right now. I'm looking to BRRRR a local duplex (2/2) that's stripped to the studs right now. It comes with materials to complete the job. Not sure what happened there.

The price isn't bad, estimated at $100K, including reno. What steps should I take before considering signing a contract?

This will be my first investment property, BTW. Thanks in advance!

@Haytham Al-Rabeah I'd start by figuring out why the owner is bailing on the rehab and wants to sell. It could be a strategy to partially demo/clean up and list for sale, but still figure it out and look for clues. Maybe the property had an expensive surprise at the start of renovation. Don't get caught holding the bag on a $15k foundation issue. 

If you could provide the other numbers (ARV, rent, taxes, rehab budget) we can judge if it's good BRRRR investment.

You say 'estimated' at $100k including reno. Who did the reno estimate? This is the only number you need be concerned with now. Get it re-bid and know exactly what it will cost to get the house livable and in condition to rent and refi.

I suspect this is the number that went south on the previous owner, and he had to bail. There are few other reasons to leave materials on site like that. Speaking of materials, are you 100% sure that they are sufficient to finish the project? I'd bet you'll need more of something.

Hire a GC and/or inspector to give you their opinion and a price. It will cost you about $1000 but then you will know. Otherwise you're just guessing...and taking a big chance.

@Haytham Al-Rabeah Looks like solid deal provided you can work out the rehab budget or get a strong estimate. Personally I'd piece it out with different contractors (plumbing, electrical, drywall, flooring) and swing some hammers to save money. Real estate agents don't anything about rehab. 

There are many reasons someone stops a project but protect yourself. When I started out YES I hired an inspector, I had a few other people give me opinions, and I learned by getting dirty. Didn't have the cash to hire it out anyways. The properties I own were build around 1930 but the remodels were not crazy challenging. Since the property was stripped to the studs you'll need permits $$$ for new electrical and maybe plumbing. I'd add 15% to your budget just to be safe. Good luck man. 

Originally posted by @Haytham Al-Rabeah :

@Bruce Woodruff - Yep, that's my suspicion, too. This is the realtor's estimate, but they only deal with investment properties.

Do you guys normally go out there with an inspector/GC first? I haven't bought anything but personal properties, so I'm not sure if the process is the same.

Realtors don't know Jack about construction. They're just guessing at best.

I would hire a GOOD Home Inspector first and get him to give you a detailed report. Then get a GC to attach numbers to the items on the report. You don't want a GC to do both because some might add in items that are unnecessary :-)