Perfect BRRRR or Flip Opportunity?!?!

8 Replies

Hello everyone, 

This property was brought to my attention as a possible first time BRRRR investment. I would love to get your thoughts on it! What would you offer? What would you expect in rehab costs? Or would you pass on this?

The home is located in Amherst Junction, WI. Amherst area is very nice and growing community. Would be framed as a 2 bedroom, 1 bathroom home. The home is 760 square feet. 

Currently this property belongs to an investor that I write insurance for. He knew that I am interested in real estate investing so he said to get estimates and stuff done and to make him an offer. Currently working on getting a few estimates in place and will update as I get them in.

That does not look good! I have been BRRRR-ing in Milwaukee for more than a decade and have had to deal with a few difficult properties. Regardless if you want to BRRRR or flip, in either case you need a heathy ARV (after rapair value). ARV is a function of neighborhood values (loaction), size (square footage) and condition. The issue with a tiny 2 BR house is always that you'll end up with a very low ARV. At the same time your rehab cost is almost the same, because small houses have just as many kitchens and bathrooms as bigger houses. You are also limited on rents for the same reason.

The second issue is that your list of "good" items is very short. Most investors make the mistake that they look at the things they need to fix, I always make a list of things that I don't have to fix: like good roof, good siding, good windows, good furnace, plumbing, water heater, driveway, garage, etc When your list of good items is very short, you are probably looking at a money pit.

What would I offer for this? Land value minus 10k for tear down minus profit.  And that is not going to happen - it will probably sell to someone who will live there and fix it up, while having very low expectations and completely underestimating the expenses they willlll face. 

I agree small town community

Resulting in limited options

Looks like a pit

Less than 1% of me is considering Land contract ( lock up property , rent to own to a local handyman 

with 1 - 2 year option to purchase, after 2 year hopefully cash out original owner but again less 1 % ) 

Now if the property was locate in a bigger community : 

pick up ___ cheap , repair and be ready to weigh your options Brrrr or flip

So far this is what I've gotten. It would cost about $60k-70k to do the entire rehab as estimates show. The ARV for this area falls between $100k-115k. So if I could get an ARV of even $100,000 I could cash out refinance at 80% LTV. Estimated rental income with it being practically brand new I could get about $850-$1000/month.

Another thing not pictured here is another building on the same lot. Its about 800sq ft completed gutted as well. I don't think it was used as a garage because there is no garage doors on it, maybe a shop once upon a time as its just the 4 exterior walls and floor. I was thinking this building could also have potential as a small Airbnb. 

@Mark Andersen feel free to DM me and I can give you the name of the guys that gave me an estimate. 

OHHH wow. How much experience do you have? I like distressed properties but every room needs major work. That probably needs a new roof and HVAC as well $$$. 1000% agree with @Marcus Auerbach on this one. 

I stay away from properties where the rehab cost exceeds my purchase price. You'd have to get this property practically for free. if you rent it at say, $900/mont, it will take you forever to recoup your rehab costs. Run the other way, quickly. This is not a deal to be considered.