BRRR or Flip on SFR in nice neighborhood

7 Replies

Just bought a house for $40,000 cash.

In a nicer neighborhood across the street from middle School.

Needs a lot of work.My realtor and I think fully rehabbed and add a garage and landscaping ($93,000 rehab cost) it will fetch $225,000 less his commission to sell it.

To get it rentable/livable ($55,000 rehab cost).I think it will appraise at $150,000 to $170,000 and rent for $1500+ a month based on comps.

This is my first property.I originally thought my plan was to buy and hold but not sure now.My first hunch is that the expense and time to get top dollar as a flip,is not worth it as I could get it livable and rent it out and move to the next one quicker.

Any thoughts or success/failure stories from either perspective are welcome.

Thanks in advance .

I have several questions, but I'll keep it simple to start. Are you paying for this out of pocket? and how reliable is the $225K ARV with all the bells and whistles?

The "make it livable" option seems pretty nice. All in for $95K, with an ARV of $150-170K. Refinancing it in a little while will likely return most or all of your cash if those estimates hold up. You could move on quickly and have a cash-flowing asset in your pocket.

@Paul Doty yes im paying out of pocket.

The house across the street sold for $218,000 partially rehabbed. It is a bigger house but has no garage.Also its quite ugly.

How long would I have to wait to refi.If tgis deal works I wouldnt mind leveraging and doing it again.

Originally posted by @Marvin Miller :

@Paul Doty yes im paying out of pocket.

The house across the street sold for $218,000 partially rehabbed. It is a bigger house but has no garage.Also its quite ugly.

Square footage and features (number of beds/baths, finishes, heating style, etc.) definitely play into the home's value. Whether or not it's ugly/cute factor weighs into the appraisal likely depends on the mental game of whoever is doing the appraising. In my area, garages aren't worth much unless they have a permitted ADU. This is where an experienced realtor is an excellent counsel.

As far as how long until you refi, I believe it's usually 12 months, but have been hearing more cases lately of only 6 months. A good MLO can give you guidance here. 12 months isn't bad, but six is much better. Rinse and repeat. Even if you can't get 100% of your cash back out, it could still be a viable option.

 

I don't see any reason you couldn't go all in and do all those things plus the garage.  Even if it appraises a little lower I think you will still do alright.

If you plan to never sell and only keep as a rental your money might be well spent on getting it rent ready to start. You could always refinance and cash out later or take out a HELOC to recoup some of that money. The garage can always be added at a different time and you can take that 40k you save to put that down on another house. Either way I think you are in a good position.

Originally posted by @Brent Paul :

 The garage can always be added at a different time and you can take that 40k you save to put that down on another house.  Either way I think you are in a good position.

Hey, that's a good point. No reason you can't do the whole project, just broken into phases.

 

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