Leaving some serious $$ in my BRRRR, worth it?
I will try to make the post as short as possible. I am under contract on a side by side duplex ( two - 1 bed 1 baths). Purchase price is $300k. Before I continue, I would like to say, this is a VERY desirable beach town and the demand for annual and summer rentals is ALWAYS high. Originally I was going to try to keep my construction costs to around $35,000, but if I am being honest with myself and my design tastes, I KNOW I will be closer to the $50,000 number. The arv is only $380,000 - $390,000, which would put me around $305,000 when I refi. This means I am potentially going to leave $50,000- $60,000 into the deal. The only reason I have not killed the deal, is the market rents for each are around $1400- $1500 and I know they will be filled immediately upon completion of construction. This would put my $ on $ return around 14.5- 15% (property should be $800 positive each month). I currently have $300k liquid in the bank/investments. I have very low cost of living, so for me to leave the $50,000 in there would not change my quality of life. I really am leaning towards doing the deal, especially since this is the town I REALLY want to invest in. My hesitancy is the fact that compared to my other BRRRR deals, this one seems significantly less enticing.
In this crazy market, what do you guys/gals think? My goal is to keep investing for as long as I can imagine, throughout all markets. Has anyone had a similar situation and what was your outcome?! I would REALLY appreciate any and all feedback.
Thanks everyone,
James