First BRRRR analysis

[Jason Sung]

Hi all, I am new to BRRRR. Do you think this is OK deal or not?

PP: 150k. 
rehab estimate; 40-50k

ARV: 230-250k

Rent potential: 1700 per month

DFW is a hot market and hard to find good deal. 
If total cash in (purchasing and rehab) is 200k, with ARV 240k, I think I can refi 180k (75%) after regab. I will end up leaving 20k.

I think this property also has some appreciation potential as well and want to hold it. 
What do you think? 

[Andrew Garcia]

Hi @Jason Sung, the biggest thing that new BRRRR'ers forget is the holding cost?

Is the rehab estimate including utilities until the rehab is completed?

Are you financing the purchase and repairs? You need to factor in the interest and finance charges.

There are other considerations but those are a few of the larger expenses.

Hope this helps! Let me know if I can be of any assistance.

[Account Closed]

How old is the home?  How big is the home - 3/2, 4/2, 3/1,... what is the sq ft?  A 2004 3/2/2 won't need as much rehab as a 1976 3/3/2 so you might be over estimating your costs.  It's always good to pad your budget by 20% for unexpected things.... you find asbestos, or as you start demo you find there is more termite damage or pest problems that have been eradicated but left residual damage, etc... 

And are you counting on the appreciation or is it the cherry on top?  NEVER COUNT ON the house appreciating in value.  The house will pick up forced appreciation with the rehab as long as you rehab the right things.... High end finishes like nickel faucet handles and crown molding won't help the property if the curb appeal and exterior is a shamble.  The first thing that draws potential is the curb appeal.  You can do a reasonable linoleum flooring and hard wood simulation in a C area but will want nice tile and actual hard wood flooring in an A district.  

[Andrew Postell]

@Jason Sung thanks for posting!  Always great to hear from a fellow Texan.  You have some good responses above...and yes, the TYPE of property is critical here....but the real question is are you ok with leaving $20k (or more) in the deal.  When I first got started I didn't even have $20k to leave in anything - so to me I would offer less on this transaction (if everything else checked out).  Meaning, I'm not passing on the property because "the numbers don't work" - I'm just making an offer that allows me to feel more comfortable with it.  I hope that makes sense how I am describing it....but that's how I would look at it.