Great Deal- Best Course of Action?

Question

I have found my first house to invest in and looking at different options to get the most from the investment.

Purcahse- $75,000. Used a hard money lender for purchase amount and will be a 50/50 split on profit

ARV- $115,000

House is being purchased from a wholesaler and is 90% flipped already. New roof, windows, furnace, water heater, carpet, shower/tub, electrical (all of the big ticket items)

The easy route is to finish the flip and sell for a profit. However, is there a better investment option? BRRRR? How would that look?

Alex Heidenreich · Answer

What is the renovation budget/estimate? That is going to heavily determine what you do. With an ARV of $115k you could potentially cash-out refinance roughly $86k.  That would mean your renovation budget would need to be under $11k in order to recoup all your cash in the deal. With that being said, you would then have to factor in your hard money lender as well. Do you have an agreement with them based on a flip? Is there an allowance for a refinance? That will all factor into your deal analysis.

Andrew Deming · Answer

Thanks everyone! Def gave me some options to look at and think about. With having hard money lender I am looking at flipping so I can pay them off and move onto my next deal. Perhaps with my own money I would be able to BRRRR it with a little less hassle of paying back a lender.

Zachary Ray · Answer

I agree Alex pretty much answered this one.

Dan V. · Answer

Other than what was said above, if you flip make sure you factor in all the costs associated with it (origination fees, holding costs, closing costs, etc.) For BRRRR, other than getting your money back, check also if you will cash flow from it. Each has different criteria in determining a deal so figure out what would that be for you and decide which way you wanted to go. Good luck!

Bronson Massas · Answer

Whether you want to BRRRR or sell is really just deciding which kind of investment strategy you prefer and will depend heavily on market rents. Selling would give you a nice chunk of cash to put into another investment, which would likely have a high ROI but will take much active work to realize those returns. BRRRRing would allow you to earn long-term rents at what is essentially no cost to you if it cash flows positively (cash-out to pay off your lender + up to $11k in cash to reimburse you for the work completed). This would be a lower ROI but take much less work to realize and carries much less risk.

Caleb Brown · Answer

Alex is spot on^^

Great Deal- Best Course of Action?

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