Signed PSA on first BRRR deal, bought off Hubzu

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Been listening to the podcast for a year but in March I decided to get serious. Started calling brokers & analyzing deals more closely. In April I went under contract on a 6-unit in York, Pa with under market rents & value-add, that I close 5/31. Super excited about the deal but also realized how quickly my capital will be depleted buying this way. Really helped me to appreciate the BRRRR strategy... despite my dislike for the moniker. :) Which brings me to the hunt for a distressed multi family in an decent neighborhood. I saw many candidates, most very terrible, until finally found a bank owned property up for auction. Didn’t actually realize it was on Hubzu until my agent pointed it out to me (I saw it via a Redfin listing with the reserve price listed). Bought at $71k plus 5% buyers premium. Estimating $7,500-10,000 in repairs, less if I do some work myself or bring in a cousin who wants to get into flipping. ARV (based on recent comps) is $105-110k... could be more but I’m trying to be conservative. Estimating $1500-1800 for rents. I will be buying & fixing the property using my heloc at 3.74% with interest only payments. For a first BRRR in a town I was looking to buy in anyway, my goal is to be in less than $10k to this property after refi cash out. 1st floor 1bed/1bath- - I mention two furnaces but misspoke... 1st floor steam heat removed & it’s electric baseboard. 2nd & 3rd floor - Let me know how what you think!

Howdy @Dennis W.

Your post is a little hard to follow.  But here is my interpretation.

Purchase price $74,550

Rehab estimate $10,000

ARV $105,000

Closing costs. ??

Holding costs ??

Acquisition loan (HELOC) $84,550 plus (Closing and Holding costs)

Interest rate 3.74%

P&I (interest only) $263.51

Here is the problem I see with your deal. If you Refinance and leave $10,000 of your cash still in the property that means you will have 2 loans to pay off. The $10K remaining balance of the HELOC and the new Refinance loan.

Appreciate the response. Apologies the post wasn’t clearly laid out. 

As to holding costs, I only expect to be rehabbing for 2-3 months, after which the rents will pay for it. 

Closing costs may be what I’m stuck with being into property for. 

After refi if I have a balance I can pay off my HELOC with cash. Just trying to be into the property for close to no money.

Congrats on moving forward. My comment is $10K in renovations seems very low, though of course I don't know the full condition of the property.  I just know $10K spends really quickly, even when doing work yourself.

It looks like you are purchasing for about 75--80% of market value (arv).  Personally like quite a bit more spread.  One unknown (example bad sewer main) can throw this into retail or above category. 

Keep looking, inspecting and prospecting--the deal of the year/lifetime often comes along every month!

Appreciate all the feedback. I should have included more/better numbers or asked for feedback on the repair estimate, based on the videos. I wasn’t very clear on what I was looking for.

Margins are kind of tight here for a true BRRRR deal. I’m comfortable being into this property for half or a quarter of buying at retail as I was otherwise shopping for stable rentals. Will keep a good log so I can report back.