HURRICANE HARVEY BRRRR SCENARIO

11 Replies

Hello BP investors,

First off, let me say that this website has been an amazing resource for someone like myself that is new to REI. I am working my 4th buy-and-hold and it happens to be my first BRRRR. I live in the Houston, Texas area and have picked up a hurricane Harvey damaged home.

here are the rough numbers

paid 100K

rehab 30K

ARV 200K

Rent $1750 in the area

My offer was accepted sight unseen last night. I visited the property today and while it is a great neighborhood, about 70% of the homes on the street are vacant and damaged. In a typical BRRRR scenario, the comps in the area help to support the cashout refi, but in this situation, I'm assuming it will have a negative impact on me getting a top dollar appraisal. I know appraisals and comps are different things but doesn't the appraisal take into consideration the comp values?

In order to maximize forced appreciation, do I:

rehab as quick as I can, (in less than 60 days) and try to refi hoping the appraisers use comps PRE-Harvey 

or

do I rehab and wait it out a year+ before refinancing so that all the homes are rehabbed and values go back to where they were before the storm. (the drawback with this option is I am borrowing some money from a hard money lender)

Your input is greatly appreciated! 

Find a LOCAL investor friendly lender and ask them, they'd be best able to give you a realistic answer.

I am very new to REI and I am looking to make my first purchase very soon, but I think the second strategy of buy and hold and lease the property out for 18 months and see where the market is. If the market is up, then sell, if not then you have passive income from the tenant.

Can you update how this is working for you?  My neighborhood was 100% affected but we were able to refinance a couple months ago after a full remodel. The comp situation is a bit complicated because most homes on the market are gutted. 

Hi @Lindsay Brake , I had the same issue but luckily the appraiser was able to find comparable homes that had sold nearby and appraised the home at 183K. I originally thought the home would appraise at or just above 200K and probably didn't due to some Harvey homes selling for much less than market skewing my numbers. Regardless, I was able to refi and pull out my initial investment (and then some). I've done a few more since with the same success and learned to adjust my anticipated ARV about 10% less than normal in my calculations to make sure and account for lower than normal comps.

@Huy Thai could you share roughly what area / neighborhood your house is located?  Great job on this, btw.

@Mark Sewell this home was in the Bear Creek neighborhood in Katy. 

Are you picking the homes up from wholesalers or doing your own marketing?

@Marshall Hooper, I got this listing off HAR. I’m still seeing similar Harvey homes listed but the prices are a bit higher.

@Jason Hirko , no problem! Glad Lindsay revived this post so I could provide an update.  I need to be better about that 

I live pretty close to Bear Creek -- fortunately far enough away that our area doesn't flood, but I am familiar with the neighborhood.  It has flooded 4 times for certain in the 10 years we have lived here.

For whatever reason, though, that little pocket belongs to Katy ISD and people love that school district.  I am sure that doesn't hurt the values over there.

You are in a good area then and yes this neighborhood is an anomaly for sure! Of course, I was concerned that potential renters would be turned off by the fact that the home was 5 feet under water only a few months prior to rehabbing but I had no issues finding a quality tenant. 

I still can't help but to get nervous every time we get heavy rains still! 

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