Help with numbers on first BRRRR property

5 Replies

Hi all!

Was wondering if I could get some help and information on my first BRRRR property. I know that I might be missing some numbers here, so this is why I'm reaching out.

Home is in Texas.

Purchase price $39,900

Estimated Rehab $30,000

It’s just an estimate, but I’m sure it’ll be pretty close to the real thing, I’ve worked with GC before. I’m not sure of the closing costs yet, or any other fees (this is my first property, so pls bear with me)

Rent in this area is a strong $700/month for homes that are very, very, basic/average, with no updates.

Doing the math on just those numbers alone the total ROI is 12%. Sounds like a good deal.

However where I'm nervous, is in the ARV. As I mentioned above, my home is in disrepair, most other homes are just old and not updated cosmetically. Homes in the area range from 40k-90k, with a few homes in the 90k-130k. And from what I can see the larger homes are pulling in the higher value.. if every home in the neighborhood is valued so low, due to being not updated I'm assuming, then how is my home supposed to appraise for what I want. My home is a larger home, but I'm nervous that my ARV will not be where I want it to be. It would be awful to purchase property, rehab it, then not be able to pull any money out (BRRRR) because it's only valued at what my total cost was..

Does this make sense? Sometimes I think too fast and jumble my words.

Any and all help is appreciated.

Thanks,

Anthony

@Anthony J Ruma, work with an experience agent and have them prepare a "Broker's Opinion." This is kind of like an informal appraisal. No, you can't use it with a bank for the refi, but it will give you a good ideal of what the ARV will be. Take the number with a grain of salt and be conservative. You should be find.

Separately, are you sure that this is going to make a good rental? Looks like you'll just hit the 1% rule. If you share your numbers, the community will be happy to take a look.

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@Jaysen Medhurst

Oh the 1% rule. Yes I was thinking of something else.

The $700/month rent is for home under 1000sqft and are old homes. My home is over 1300 sqft and will be fully renovated, for the most part.

I’m looking to get $900/month which would def fit in the 1% rule .

@Anthony J Ruma Call a couple of realtors to see if they will provide you with real comps. Tell them you want closed sales within 1 mile of this house and tell them you want the closed sales that are with 10% of the square footage of your house. Tell them you only want the updated closed sales. Most realtors do not look into the details when pulling comps. They let there automated system pull everything around the subject property without looking at the pictures of each closed sale. The tough part about getting your cash out before one year of ownership is that conventional lenders make a investor wait one year to use the new appraised value. I do know of one or two that use the new appraised value before a year is up. The only thing is that the rate is a littler higher than conventional rates. 

@Anthony J Ruma

Hi Anthony,

How specifically are you calculating your 12% ROI?