Build, Refi, Rent, Repeat?
So I almost got a BRRR under contract a couple months ago, but the wholesaler sold it to a personal buddy instead. Finding it difficult to find a BRRR deal in Tulsa area. I know eventually I will score with a hud but even those get snatched up. Been considering hitting a couple neighborhoods with direct mail over the winter. But recently I have been thinking what if I could be my own general contractor and build a house for $80 sqft and get it to appraise for $100 sqft. I know building prices are at a high at moment but just curious what others thought. I have a friend who builds in Owasso and said they only make $15k net on a house, which seems low cause companies like Ubuildit make it sound like you can have $40k in instant equity when you are your own general contractor..ha..probably a gimic. Anyways has anyone done this...build a BRRR?
If you have no experience as a general contractor and don't have a long standing relationship with sub contractors for framing, sheetrock, plumbing and electric my guess is this would not be a good plan. Most GC's have crew they work with and send them lots of business and this drives down their cost. If you are the fill in guy for the subs they will take advantage of that and it will cost you more.
Thanks Tracy. Good advice.
@Rick Martinez , it seems evident that you expect LENDERS to let you re-borrow 80% of their appraisal every time you want to go again? Whereas, I reckon you'll find it's more likely they'll only let you have 70% of their appraisal!
That's a BIG difference to your number crunching, so you'd BETTER not start out with wrong assumptions! My 2c...
@Brent Coombs . I did double check that with my portfolio lender and basically if I buy a house for $60k and ARV is $80k. Then I would just need it to appraise for $100k to work as BRRR.
Originally posted by @Rick Martinez :
@Brent Coombs. I did double check that with my portfolio lender and basically if I buy a house for $60k and ARV is $80k. Then I would just need it to appraise for $100k to work as BRRR.
If its ARV is $80k, how much extra will YOU need to spend on it in order for it to appraise at $100k?
To use your earlier example, you can't "get it to appraise for $100 sqft", unless it's ALREADY proven to be worth that!
Remember, your Broker is PROBABLY only suggesting they'd re-lend you the $60k you paid, rather than 80% of a $100k appraisal of theirs. Please, hone in on what you've REALLY been promised. Try to get it in writing from them. Cheers...
@Rick Martinez , the simple answer is that if you love construction, headaches, and managing a long-term project, and have access to a parcel at a great price, then new construction MAY be an option. But if you choose this route, you're trading time for money. Having built several new construction projects, it is tough work, and some of the other posters have made great points about the assumptions on getting subcontractors as well as refi estimates.
If you want to BRRR, I believe the key is patience. How many offers are you making? PM me and we can talk more if you're interested.
Thanks for the input fellas. I guess after listening to the BRRR podcasts it seemed so simple...
Buy a house for $60k.
Put $20k into the rehab so all in at $80k.
It appraises for $100k.
Lender refinances for 80% LTV...thus this scenario would be low or no money down.
I will present this strategy to lender and see what all I am missing so I can be prepared for worst case scenario.
@Rick Martinez Building new is bad idea, too much time and money unless you have a large experienced crew. Profits are low in new builds, but they make up for it in quantity. $15K x 100 homes ($1.5M).
There's plenty of BRRRRs potential properties in Tulsa and the surrounding areas, just need to keep growing your network, and pick other peoples brains. Reach out to others in the area who you see doing a lot of deals and ask for advice on what's been working locally.
@Jeff Filali Thanks Jeff. I have met with a local investor and he is going to help me get through my first few. I prefer Broken Arrow, but he let me know that other areas like Glenpool or Owasso are also great places to look. I have been mainly looking at MLS and have a couple of wholesale connections now, but like you mentioned I need to keep building relationships so I can get more deal opportunities.
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