BRRR or Sell? That is the question

5 Replies

Hello everyone,

I recently came across an opportunity with my dads house and I’d like to get the perspective/guidance of more seasoned investors.

My father, is getting sick and is giving me the opportunity to take over ownership of the house in Miami, FL.

Currently the house is work $320,000 and he owes $180,000 on the House.

I'm wondering if I should take over and rent out the rooms, while utilizing the available equity to apply the BRRR method. Or, start from ground zero and sell the house and start from scratch with the monies made from the sale.

Thanks in advance,

Richard - 

Sorry to hear about your father. It's always sad to hear about people with sick family members. I have a grand father in a similar situation and it's tough.

You're probably already thinking this, but the first scenario (renting) gives you a clearer estimate of your rate of return. If you were to sell and re-invest the sale profit, it may be difficult estimate your ROI.

What are the details on the house and what can it rent for?

Does it have any deferred maintenance or need any rehab?

@Richard Delbeau you should think about your goals first. Are looking for cash flow, capital, appreciation or a combination. For me cash flow is king at this stage in my life. So I would look at the return on equity. meaning how much return would I get if your brrrr vs if you sold and bought something else. The numbers and your goals will give you an answer. I might be wise to talk to a tax pro. They could help you minimize taxes paid on different scenarios of ownership transfer.

Hi @Richard Delbeau ,

I'm sorry to hear about your father. I used to work for Home Care Assistance and I understand how stressful it can be taking care of loved ones. And with that in mind, I'm agreeing with @Harv Yergin IV, you can continue renting out, and possibly create more value (by gradually renovating the property) and that way it's the least disruptive, allowing you to focus on your dad and still perhaps increase cap value.

As Suze Orman used to say: "People first, then money, then things."

Best,

@Richard Delbeau very sorry to hear about your father. Sending you good thoughts. 

This might require a deeper convo, but at a high level, here is what I would do:

-Assess my situation and figure out what is important to me in regards to possible real estate strategies and investment returns: a big lump sum of cash via flipping? monthly cash flow with no hassles of renovating? Maximizing rental returns via BRRR? etc.

-Once I know what is important to me and I have one or several strategies in mind, I would run financial analyses to make detailed projections about what is possible given my resources. I would spend extra time validating all of my income/expense/loan assumptions. For example: if you think BRRR might make sense, run the numbers - including your assumptions for renovation costs, potential rent, refinance assumptions, etc. and look at your returns. (Shameless plug - we, Dropmodel, have a BRRR financial model coming out in a few days.) .

-Once I know the numbers for each strategy I am considering, I can weigh the risks/rewards of each and pick one. 

Good luck!!