Your advice for a poor condition property that is 100% owned?

3 Replies

Hey Fellow BiggerPockets Landlords, 

Most of the materials I've been learning about from Bigger Pockets assume you're buying a new property. But what if you've owned a BRR and didn't do the last RRs (refinance or repeat)? The property is owned 100% but in poor condition. ARV is $60,000. Needed repairs are $30,000. Would you repair and hold, improve and sell or just sell? Why?

Also, does it make sense to use the same BRRRR calculators and just assume a $100 purchase price for the Pro Rata data? Seems logical, but don't want to assume.

A bit more context:

  • Property is 1950 906 sq ft, 2-1-1 with central air on 6,464 sq ft lot
  • Average class C SF neighborhood
  • Condition is livable, but it's time to true up the asset as severe damage will set in soon
  • Should rent from $700 - $800

Thanks for weighing in,

Kim

Isn't one of the R's in the BRRR renovate? Doesn't sound like you're following this methodology. Why did you buy the property? What was the game plan going into it and why haven't you executed the plan?

Great question Dick. My father passed away about 18 months ago. He was a buy and hold investor. Now, I'm helping my mom with the business and jumping in as a newbie. I don't know what his plan was to execute. So, I'm working to build that plan now. PS - this is one of 29 properties. 

Sorry about your dad. Seems like you have 2 options:

1) Do the 30k in repairs and get it rented for 800/mo. That is 32% COC return. If you estimate another 10k for taxes, insurance, and expenses if comes to 24% COC which is a good return.

2) Since you have 28 other properties to manage, evaluate them all and decide which ones you don't want to deal with (this sounds like on of them) and use proceeds from the worst performing ones to pay down/fix up the best ones. Then your mom should be able to live off the income with minimal work.