How much rehab is it worth?

Question

Hello everyone,

I will start out by saying that I am only one month or so into learning and being on my real estate journey. I went driving for dollars a couple of weeks ago in Horn Lake, MS (South of Memphis, TN) to look for potential wholesale or BRRR properties. I found a few potential leads, reached out to the owners of the properties after some manual skip tracing, and found a motivated seller.

I know that as long as the numbers work out for you, it really doesn't matter how much you have to spend on rehab or on acquiring the property. However, I am wondering how much profit you personally look for when acquiring a house to BRRR?

Would love to hear your thoughts!

Deal Numbers:

• 3 Bed, 2 Bath -  Approx 1,450 sqft
• Purchase Price: $45,000
• Expected ARV: $115,000
• Rehab Costs: $45,000 - $50,000 (2 holes in roof - somewhat sizeable but covered; moderate gutting of inside will need to be done; plus some landscaping)
• Expected Rent: $1,100/month
• Taxes+Insurance: $1,900/year

Zack Brent · Answer

Thanks for the response. I have not gotten a quote from a contractor yet, hoping to get one (or more) this week. The main concern is with the two holes in the roof and any damage they may have led to inside. We are keeping our options open as to whether we flip it or just BRRR it.

AJ Singh · Answer

@Zack Brent

did you get a contractor estimate on 45k to 50k rehab.

a 115k house will be acquired for 90k to 100k after rehab costs

It does fit in the 1% rule.

with that kind of rehab costs, the house should be brand new in all respects.

there is a difference in rental rehab and a flip rehab numbers.

please do your due diligence.