New Build: BRRR on a new construction?

Question

I recently heard on a BP podcast you can BRRR on a new build. I familiar with the process but how would it differ from a regular BRRR on an existing property? How would you run the numbers on this? Anyone that has done this themselves? Any insight would be greatly appreciated.

I'm considering starting to just build my own properties and possibly take a lower return. I'm 26 so it would be amazing to defer my maintenance expenses to years down the road.

Canesha Edwards · Answer

@Scotty Tullis

Run your numbers the same.  Start with the ARV and work your way backwards. Example: If my ARV is $200k, I want to be all in ( acquisition & construction ) at around $180k ( I like all of my deals to have built in equity).

Timing also plays a factor.  This is also why I build equity into my deals. If the market takes a down turn, I’m not stressed because I planned for this in my budgeting.  If the market goes up, icing on the cake.

Canesha

Canesha Edwards · Answer

@Scotty Tullis

The process is  the same. Just make sure you have the funds to cover the acquisition and construction, and contingency. Something always goes astray with construction , so just budget for it.  Now once the property is built and rented, mortgage it and move on to the next.

Now, financing the entire build with your own funds ties up a lot of your capital. Why not purchase the land out right and finance the construction? You could scale faster this way.  Most lenders will count the land as equity so, the amount on money you need to bring to the table is reduced.

Happy Investing.

Best,

Canesha