BRRRR deal analysis ...

4 Replies

Would this be considered a good deal? I would like a little more CashFlow but since I can get all my investment back immediately, I think its a good deal... before I pull the trigger wanted to seek any advice if I am missing anything in this deal.

Wholesale Cash Buy: $80K, off-market deal.

Rehab Cost: $0, section 8 tenant already in place.

Appraisal: 108K based on the comparative market analysis provided.

Current Monthly Rent: $950

Total Monthly Expenses: $991.90 ( P&I $343.57, Taxes and Insurance $301.33, 36% for Vacancy, Repair, and PM $347.00)

CashFlow per Month: -41.90, but if Principal payment in Mortgage is included which is about $76.90, CashFlow will be $35 a month.

I would be able to cash out all 80K from refi, but the CashFlow is marginal. There is potential for future rent to increase slightly.

Thanks!

I am not thinking clearly. You said you are doing a Wholesale Cash Buy. If so, then why do you have a mortgage.

I don't understand why you are saying 36% for vacancy. It is usually no more than 8% to 10% max.

The insurance and property taxes looks to be too high. YOu have $300 per year. I don't see too many $100k properties costing more than $400 to $500 per year for property insurance and most $100k property taxes don't usually run more than $1800 per year. I come up with about $2300 per year.

What is PM? Is that Property Maintenance? If so, that is $4164 per year and way too high. Unless, the place is thrashed and you need new plumbing, a new roof, etc. Property maintenance should be no more than 10% per year, or $950 x 12 x 10% = $1140 per year. Or add some extra for a cushion.

Personally, I would buy properties all day long for $80k if they produce $950 per month rent and I can increase the rents by 5% per year. Of course, there are always other factors to consider i.e. cracked foundations, cost for deferred maintenance, cost to rehab if everything the kitchens and bathrooms were built in the 1940's, etc. I would not buy a property where I need to bring a handgun to collect the rent.

@Jack Orthman

This will be a delayed finance situation, where I buy cash and immediately get mortgage on the house. The 36% is for Vacancy+Repair+Property Management.

Does anyone know how difficult would it be to raise rent on section 8 tenants?

You can request a rent increase as long as the tenant has been in the lease for at least 12 months.  I always provide rent comps (non-SEC 8, same city, similar property type, size, age, same bedrooms) with mine to show I am asking for a reasonable rent.