How do you do research for a BRRRR investment ?

Question

Hello Bigger Pockets family

A newbie question here , How do you determine if an area is a good investment for a bigger AVR or rental. Here is a scenario I’m basing my question on.

I have a couple of properties I have been looking at in Cleveland and Columbus that area that are around 65k. But not sure how to determine if they are going to rent after renovations or if I can get section 8 there. How do I determine if the the AVR is going to go up if I put money in ? I'm trying to do my first BRRRR.

Robert Ellis · Answer

columbus you'll be buying trailers if you are in Franklin county, some rare smaller ones but most of that is smaller markets like Newark, Mansfield, etc where there is lots of upside still and markets are going through massive changes in a good way. I wouldn't touch Cleveland personally it can't and shouldn't' be compared from an ARV potential it's a cash flow market strictly. you can't do the strategy you are talking about when the average home is more than 60 years old in Cleveland and sells for $120k or less. hard to change those economics. I'd look at Dayton over Cleveland it has the second highest price of resale out of all the ohio markets than columbus.

Michael Smythe · Answer

@Mike Mutabazi please tell us you're NOT another newbie that thinks they figure out an investment angle that everyone else here on BP somehow missed!

Almost any $65k property in a Midwest city is going to be Class D or need $20k+ in rehab.

Class D means you'll only get the worst tenants, who have a high rate of eviction for nonpayment AND they trash the place on their way out.

You MAY get lucky and get a S8 tenant for your Class D rental, but most of them will want to live in a better neighborhood. Most S8 tenants live in Class C up to B-minus properties.

Travis Biziorek · Answer

@Melanie P. is correct that you are going to have a challenge finding financing for properties in the $65k range. But this is the bread and butter of what I do in Detroit.

Pay cash, do the renovations, then refi out.

As you mentioned, you need to be confident in your comps so you can put an accurate ARV on the project before you pull the trigger.

The best way to do this is to simply look at what's sold and is for sale in the area. You could also have a realtor pull comps for you.

That said, you must REALLY understand your market at this price point. For example, in Detroit comps can be all over the place. And unless you understand why you'll have a hard time confidently determining an ARV.

Melanie P. · Answer

I think you will find it challenging to execute BRRR on a 65k property because banks don't finance that low. I could be wrong I'm sure others will chime in.

How do you do research for a BRRRR investment ?

How do you do research for a BRRRR investment ?

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