BUILD, rehab, rent, refinance, repeat

[Alexander Hauk]

I am in Oregon. Houses are expensive here.

Why don't I see more BRRRR strategies that involve BUILDING vs buying a distressed property?

I understand the numbers may not line up in certain areas although in Oregon I can develop a property as follows:

$30,000 for a lot

$40,000 to develop

$120,000 for Hiline, Adair, or Simplicity to build

$190,000 all in for a 3/2 home with garage worth $275,000 pretty easily.

Cash out refi at 85% LTV giving us:

$233,750 - $190,000 = $43,750 plus whatever down payment we put.

This would rent for $1,500 to $1,800 a month.

What am I missing from this scenario?

Why bother rehabbing if this can be done?

[Alexander Hauk]

@Kevin Sobilo

Good advice. I just typed it in using realistic numbers. I can refi at 80% LTV and pull out about $24,000 while cash flowing $90 a month. Not much but being able to pull out that money is my main goal. That would recoup the down payment plus a little more.

Also, once I do this with the first house, I will be able to immediately build a second house right next door for $52,000 less seeing as developing cost is for two lots right next to each other. We’ll see how it goes.