Expectations for BRRRR in Columbus OH
Hello! I am first time real estate investor from California. I am looking to BRRRR in Columbus OH, in North Linden or any similar C+/B- neighborhood. My budget will be around $200K saved up within the next year to finance a cash offer and rehab.
I am planning for a 3 bedroom SFR, cash offer of 125K-150K, and rehab costs of 20K-40K. Including closing & holding costs I can be at ~170K all in, and I am guessing around 200K ARV (maybe a higher ARV? I need to get some more opinions on this too). Does this all sound reasonable so far?
With a 75% LTV I would have to leave ~20K in the deal. I think I would be okay with this since it is half the down payment of a $200K property, I would have 50K in total equity right from the start, and I get a fully refurbished property. Minimal cash flow is acceptable for me because it seems like appreciation and increased rent could work well for me long term. I also do not plan on quitting my W2 job any time soon.
Are my expectations with BRRRR too low here? I already spoke with an agent & contractor that have been super helpful with all my questions. I just cannot get the numbers to work out to fully recoup all the money I would put in. Should I just consider a different market where I have a better chance to recover more of my cash invested?
Columbus is a great market to Brrr because it gives a good mix of cash flow and appreciation. I’ve done a few Brrrs here in Columbus and from experience it will be very difficult to keep your renovation costs in the budget you provided. Honestly, it’ll be hard to keep renovation costs in any budget with prices rising so rapidly.
Controlling costs is only half the battle. You are going to need a team to complete a long distance brrrr. Make sure you thoroughly vet your contractor. Get your payment schedule dialed in. And make sure you find some sort of boots on the ground you can trust! You will need to verify work completed as well as quality of work.
challenging, but doing your homework can be a game changer! You got this!!
Quote from @Darryl H.:
Hello! I am first time real estate investor from California. I am looking to BRRRR in Columbus OH, in North Linden or any similar C+/B- neighborhood. My budget will be around $200K saved up within the next year to finance a cash offer and rehab.
I am planning for a 3 bedroom SFR, cash offer of 125K-150K, and rehab costs of 20K-40K. Including closing & holding costs I can be at ~170K all in, and I am guessing around 200K ARV (maybe a higher ARV? I need to get some more opinions on this too). Does this all sound reasonable so far?
With a 75% LTV I would have to leave ~20K in the deal. I think I would be okay with this since it is half the down payment of a $200K property, I would have 50K in total equity right from the start, and I get a fully refurbished property. Minimal cash flow is acceptable for me because it seems like appreciation and increased rent could work well for me long term. I also do not plan on quitting my W2 job any time soon.
Are my expectations with BRRRR too low here? I already spoke with an agent & contractor that have been super helpful with all my questions. I just cannot get the numbers to work out to fully recoup all the money I would put in. Should I just consider a different market where I have a better chance to recover more of my cash invested?
A lot of the deals I do in Columbus have equity still in them. I do not mind it. Less debt and I cash flow better. In 30 years, they will be paid off and I will be rich.
@Darryl H. I've been to Columbus many times, but I'm not super familiar with property values there (so I can't speak to whether your numbers are accurate...the actual numbers could be a lot worse, or a lot better).
However, I do see a few issues to consider...
First off, I want to be clear: I'm not saying that you shouldn't pursue your plan (and, since I don't know the numbers in Columbus, for all I know, your plan could be a home run). However, what you described brings up some concerns that you'll want to resolve before moving forward.
You mentioned that cashflow is not very important to you, and it sounds like your plan hinges partly on future appreciation and future rent growth. Personally, I think this is not advisable--especially for a new investor. Assuming that you don't have a massive stack of cash and assets that put you in a position where this property could completely fail and it wouldn't affect you much, planning on appreciation and rent growth is, essentially, speculation. At the end of the day, NOBODY knows what the market will look like in the future, and anyone who says they do is full of it. Sure, we can make educated guesses, but these days there are about as many valid arguments predicting a market crash as there are valid arguments for flattening, as there are valid arguments predicting continued growth.
What's your plan if property values flatten (or go down), especially at the moment that you're trying to refinance the property? What's your plan if rent doesn't increase, or rents decrease? Although inflation might push rents up, it is not a guarantee that rents will increase--lots of things can occur at the macro and local levels that could flatten or decrease rents (e.g.; rent control legislation or Gov. housing affordability initiatives, a crash in house values that allows renters to buy, a big-money developer builds a luxury apartment building next door and is able to to rent units that are A+ for only $100 more than your C or B grade property, etc., etc.).
New investors have come up in an era where values have only gone up, and plenty of gurus and their followers have drunk the kool-aid and believe that values only go in one direction (up). The reality is, values and rents can--and do--crash. (for instance, Vegas in '09, Detroit since the '90s, etc., etc.). Some downturns are temporary, but some downturns are permanent. For instance, between 2000 and 2020, Detroit lost roughly the population of Pittsburgh...think about that for a moment--imagine that in the course of 20 years, Pittsburgh literally disappeared from the map and had a population of 0 (because that's essentially what happened). Needless to say, it's unlikely that there will ever be a full recovery. Obviously, I don't think this will occur in the near future in Columbus, but the point is: if your plan hinges on future rent growth and/or future appreciation, you're speculating.
As has been mentioned on many BP podcasts, cashflow is similar to your "defense", in that it helps protect you from losing the property if property values crash, and appreciation is similar to your "offense", in that it's where real wealth can (potentially) be built. Because of this, cashflow is usually essential for any beginning investor who doesn't have a massive stack of cash and assets to fall back on if things go south. Unless you have that massive stack of cash and assets, it's probably not advisable to buy a property with insufficient cashflow and an expectation of future appreciation and rent growth (particularly right at a clear turning point in the market, and especially when using the BRRRR strategy that hinges on successful Re-fi'ing at a moment when rates are increasing at a historic pace).
Because rates have increased, and are all but guaranteed to increase more, your BRRR financial models need to include worst-case-scenario rates (take a look at the rates they had in the late '70s and '80s!). If your model doesn't pencil out with those worst-case-scenario rates, then it's probably not an advisable deal (particularly for a new investor with limited resources).
Again, I'm not saying that you shouldn't pursue your BRRRR plans (in fact, I'd advise anyone to learn about BRRRR'ing and real estate investing, and if someone has an investment plan that pencils out, I'd say go for it!). I'm just saying: before you put your money on the line, it's pretty important that you factor the aforementioned issues into your financial models.
Hopefully that's useful info.
Good luck out there!
Quote from @Darryl H.:Hi Daryl: it appears you have put a lot of thought into your BRRRR process. I have several suggestions that you may consider. First, a 30k spread is inadequate to succeed in a BRRRR purchase. Most of the fix and flip lenders will make you put a great deal more cash into the deal if the spread is that thin. Second, on a thin spread if some of the challenges that @Darryl Hua mentioned materialize you do not have enough of a margin to have a successful exit strategy. I suggest that you look for a minimum 50k spread. You should also know the maximum LTV on the out based on the DSCR. This will change as rates change but it will give you a good sense of how much you are going to get out on the refinance.
Hello! I am first time real estate investor from California. I am looking to BRRRR in Columbus OH, in North Linden or any similar C+/B- neighborhood. My budget will be around $200K saved up within the next year to finance a cash offer and rehab.
I am planning for a 3 bedroom SFR, cash offer of 125K-150K, and rehab costs of 20K-40K. Including closing & holding costs I can be at ~170K all in, and I am guessing around 200K ARV (maybe a higher ARV? I need to get some more opinions on this too). Does this all sound reasonable so far?
With a 75% LTV I would have to leave ~20K in the deal. I think I would be okay with this since it is half the down payment of a $200K property, I would have 50K in total equity right from the start, and I get a fully refurbished property. Minimal cash flow is acceptable for me because it seems like appreciation and increased rent could work well for me long term. I also do not plan on quitting my W2 job any time soon.
Are my expectations with BRRRR too low here? I already spoke with an agent & contractor that have been super helpful with all my questions. I just cannot get the numbers to work out to fully recoup all the money I would put in. Should I just consider a different market where I have a better chance to recover more of my cash invested?
Finally, it is not a good time to buy a listed property from the multi list and than rehab. and refinance. You must work the off market deals, sheriff sales, short sales, internet listings and foreclosures. If you pay market price than you will have a tough time executing out in a advantageous fashion. Good luck.
Quote from @Darryl H.:
Hello! I am first time real estate investor from California. I am looking to BRRRR in Columbus OH, in North Linden or any similar C+/B- neighborhood. My budget will be around $200K saved up within the next year to finance a cash offer and rehab.
I am planning for a 3 bedroom SFR, cash offer of 125K-150K, and rehab costs of 20K-40K. Including closing & holding costs I can be at ~170K all in, and I am guessing around 200K ARV (maybe a higher ARV? I need to get some more opinions on this too). Does this all sound reasonable so far?
With a 75% LTV I would have to leave ~20K in the deal. I think I would be okay with this since it is half the down payment of a $200K property, I would have 50K in total equity right from the start, and I get a fully refurbished property. Minimal cash flow is acceptable for me because it seems like appreciation and increased rent could work well for me long term. I also do not plan on quitting my W2 job any time soon.
Are my expectations with BRRRR too low here? I already spoke with an agent & contractor that have been super helpful with all my questions. I just cannot get the numbers to work out to fully recoup all the money I would put in. Should I just consider a different market where I have a better chance to recover more of my cash invested?
I think Columbus is a great BRRRR market!
My first BRRRRR was $300k, put $50k into it, refinanced, and got $90k back. I just refinanced again and got another $50k and it still cash flows $1800/month. Second BRRRRR cost $160k, put $55k into it, refinanced, and got me just under $200k back and cash flows $2000/month.
Currently working on my 5th BRRRR in the city!
Maybe you need to be looking at some off market deals? Are you asking your agent to check your numbers? https://www.calculator.net/ren... I like to use this calculator to run my numbers
Quote from @Remington Lyman:
Quote from @Darryl H.:
Hello! I am first time real estate investor from California. I am looking to BRRRR in Columbus OH, in North Linden or any similar C+/B- neighborhood. My budget will be around $200K saved up within the next year to finance a cash offer and rehab.
I am planning for a 3 bedroom SFR, cash offer of 125K-150K, and rehab costs of 20K-40K. Including closing & holding costs I can be at ~170K all in, and I am guessing around 200K ARV (maybe a higher ARV? I need to get some more opinions on this too). Does this all sound reasonable so far?
With a 75% LTV I would have to leave ~20K in the deal. I think I would be okay with this since it is half the down payment of a $200K property, I would have 50K in total equity right from the start, and I get a fully refurbished property. Minimal cash flow is acceptable for me because it seems like appreciation and increased rent could work well for me long term. I also do not plan on quitting my W2 job any time soon.
Are my expectations with BRRRR too low here? I already spoke with an agent & contractor that have been super helpful with all my questions. I just cannot get the numbers to work out to fully recoup all the money I would put in. Should I just consider a different market where I have a better chance to recover more of my cash invested?A lot of the deals I do in Columbus have equity still in them. I do not mind it. Less debt and I cash flow better. In 30 years, they will be paid off and I will be rich.
@Remington Lyman I've been seeing some people put things on 15 year notes. Thoughts on this? as long as it still cash flows.
BRRR's are one of the best investment tools in the RE game in my opinion.
I'm trying to do them on a larger scale though. I GC mine so there's only so much time in the day... better to go after the big fish!
Columbus is a great spot for them, with our projected increase in rents.
Quote from @Darryl H.:Let me know if you'd consider Pittsburgh, PA to invest!
Hello! I am first time real estate investor from California. I am looking to BRRRR in Columbus OH, in North Linden or any similar C+/B- neighborhood. My budget will be around $200K saved up within the next year to finance a cash offer and rehab.
I am planning for a 3 bedroom SFR, cash offer of 125K-150K, and rehab costs of 20K-40K. Including closing & holding costs I can be at ~170K all in, and I am guessing around 200K ARV (maybe a higher ARV? I need to get some more opinions on this too). Does this all sound reasonable so far?
With a 75% LTV I would have to leave ~20K in the deal. I think I would be okay with this since it is half the down payment of a $200K property, I would have 50K in total equity right from the start, and I get a fully refurbished property. Minimal cash flow is acceptable for me because it seems like appreciation and increased rent could work well for me long term. I also do not plan on quitting my W2 job any time soon.
Are my expectations with BRRRR too low here? I already spoke with an agent & contractor that have been super helpful with all my questions. I just cannot get the numbers to work out to fully recoup all the money I would put in. Should I just consider a different market where I have a better chance to recover more of my cash invested?
Quote from @Austin Steed:
Quote from @Remington Lyman:
Quote from @Darryl H.:
Hello! I am first time real estate investor from California. I am looking to BRRRR in Columbus OH, in North Linden or any similar C+/B- neighborhood. My budget will be around $200K saved up within the next year to finance a cash offer and rehab.
I am planning for a 3 bedroom SFR, cash offer of 125K-150K, and rehab costs of 20K-40K. Including closing & holding costs I can be at ~170K all in, and I am guessing around 200K ARV (maybe a higher ARV? I need to get some more opinions on this too). Does this all sound reasonable so far?
With a 75% LTV I would have to leave ~20K in the deal. I think I would be okay with this since it is half the down payment of a $200K property, I would have 50K in total equity right from the start, and I get a fully refurbished property. Minimal cash flow is acceptable for me because it seems like appreciation and increased rent could work well for me long term. I also do not plan on quitting my W2 job any time soon.
Are my expectations with BRRRR too low here? I already spoke with an agent & contractor that have been super helpful with all my questions. I just cannot get the numbers to work out to fully recoup all the money I would put in. Should I just consider a different market where I have a better chance to recover more of my cash invested?A lot of the deals I do in Columbus have equity still in them. I do not mind it. Less debt and I cash flow better. In 30 years, they will be paid off and I will be rich.
@Remington Lyman I've been seeing some people put things on 15 year notes. Thoughts on this? as long as it still cash flows.
no
Quote from @Ashley Cross:
Columbus is a great market to Brrr because it gives a good mix of cash flow and appreciation. I’ve done a few Brrrs here in Columbus and from experience it will be very difficult to keep your renovation costs in the budget you provided. Honestly, it’ll be hard to keep renovation costs in any budget with prices rising so rapidly.
If you do not mind me asking, how much would you budget for renovation?
Is it reasonable to find a fixer upper for 125-150K?
Quote from @Leo R.:
@Darryl H. I've been to Columbus many times, but I'm not super familiar with property values there (so I can't speak to whether your numbers are accurate...the actual numbers could be a lot worse, or a lot better).
However, I do see a few issues to consider...
First off, I want to be clear: I'm not saying that you shouldn't pursue your plan (and, since I don't know the numbers in Columbus, for all I know, your plan could be a home run). However, what you described brings up some concerns that you'll want to resolve before moving forward.
You mentioned that cashflow is not very important to you, and it sounds like your plan hinges partly on future appreciation and future rent growth. Personally, I think this is not advisable--especially for a new investor. Assuming that you don't have a massive stack of cash and assets that put you in a position where this property could completely fail and it wouldn't affect you much, planning on appreciation and rent growth is, essentially, speculation. At the end of the day, NOBODY knows what the market will look like in the future, and anyone who says they do is full of it. Sure, we can make educated guesses, but these days there are about as many valid arguments predicting a market crash as there are valid arguments for flattening, as there are valid arguments predicting continued growth.
What's your plan if property values flatten (or go down), especially at the moment that you're trying to refinance the property? What's your plan if rent doesn't increase, or rents decrease? Although inflation might push rents up, it is not a guarantee that rents will increase--lots of things can occur at the macro and local levels that could flatten or decrease rents (e.g.; rent control legislation or Gov. housing affordability initiatives, a crash in house values that allows renters to buy, a big-money developer builds a luxury apartment building next door and is able to to rent units that are A+ for only $100 more than your C or B grade property, etc., etc.).
New investors have come up in an era where values have only gone up, and plenty of gurus and their followers have drunk the kool-aid and believe that values only go in one direction (up). The reality is, values and rents can--and do--crash. (for instance, Vegas in '09, Detroit since the '90s, etc., etc.). Some downturns are temporary, but some downturns are permanent. For instance, between 2000 and 2020, Detroit lost roughly the population of Pittsburgh...think about that for a moment--imagine that in the course of 20 years, Pittsburgh literally disappeared from the map and had a population of 0 (because that's essentially what happened). Needless to say, it's unlikely that there will ever be a full recovery. Obviously, I don't think this will occur in the near future in Columbus, but the point is: if your plan hinges on future rent growth and/or future appreciation, you're speculating.
As has been mentioned on many BP podcasts, cashflow is similar to your "defense", in that it helps protect you from losing the property if property values crash, and appreciation is similar to your "offense", in that it's where real wealth can (potentially) be built. Because of this, cashflow is usually essential for any beginning investor who doesn't have a massive stack of cash and assets to fall back on if things go south. Unless you have that massive stack of cash and assets, it's probably not advisable to buy a property with insufficient cashflow and an expectation of future appreciation and rent growth (particularly right at a clear turning point in the market, and especially when using the BRRRR strategy that hinges on successful Re-fi'ing at a moment when rates are increasing at a historic pace).
Because rates have increased, and are all but guaranteed to increase more, your BRRR financial models need to include worst-case-scenario rates (take a look at the rates they had in the late '70s and '80s!). If your model doesn't pencil out with those worst-case-scenario rates, then it's probably not an advisable deal (particularly for a new investor with limited resources).
Again, I'm not saying that you shouldn't pursue your BRRRR plans (in fact, I'd advise anyone to learn about BRRRR'ing and real estate investing, and if someone has an investment plan that pencils out, I'd say go for it!). I'm just saying: before you put your money on the line, it's pretty important that you factor the aforementioned issues into your financial models.
Hopefully that's useful info.
Good luck out there!
Thanks for the extremely detailed response Leo! This is helpful. I should have been more clear, so with vacancy/repairs/capex all set to 5% each of rent per month for a total of 15% the numbers still barely cash flow up to $50/month. So I was thinking worst case scenario I would just have a tiny profit each month, but maybe I am not being conservative enough here. I figured with a complete rehab in a decent neighborhood, repairs/capex will not be as significant and it was conservative to cash flow positive including those expenses. Would you recommend new investors to expect more cash flow off a BRRRR even after including vacancy/repairs/capex, let's say around $100 per month instead?
Quote from @Steven Goldman:Thanks Steven. I will factor in a 50K spread to my numbers. I was hoping on doing a cash offer to skip having to deal with lender fees twice and to lower my holding costs. My agent did find one off market deal, so I am hoping she will be able to get some more later when I can save up enough cash.
Quote from @Darryl H.:Hi Daryl: it appears you have put a lot of thought into your BRRRR process. I have several suggestions that you may consider. First, a 30k spread is inadequate to succeed in a BRRRR purchase. Most of the fix and flip lenders will make you put a great deal more cash into the deal if the spread is that thin. Second, on a thin spread if some of the challenges that @Darryl Hua mentioned materialize you do not have enough of a margin to have a successful exit strategy. I suggest that you look for a minimum 50k spread. You should also know the maximum LTV on the out based on the DSCR. This will change as rates change but it will give you a good sense of how much you are going to get out on the refinance.
Hello! I am first time real estate investor from California. I am looking to BRRRR in Columbus OH, in North Linden or any similar C+/B- neighborhood. My budget will be around $200K saved up within the next year to finance a cash offer and rehab.
I am planning for a 3 bedroom SFR, cash offer of 125K-150K, and rehab costs of 20K-40K. Including closing & holding costs I can be at ~170K all in, and I am guessing around 200K ARV (maybe a higher ARV? I need to get some more opinions on this too). Does this all sound reasonable so far?
With a 75% LTV I would have to leave ~20K in the deal. I think I would be okay with this since it is half the down payment of a $200K property, I would have 50K in total equity right from the start, and I get a fully refurbished property. Minimal cash flow is acceptable for me because it seems like appreciation and increased rent could work well for me long term. I also do not plan on quitting my W2 job any time soon.
Are my expectations with BRRRR too low here? I already spoke with an agent & contractor that have been super helpful with all my questions. I just cannot get the numbers to work out to fully recoup all the money I would put in. Should I just consider a different market where I have a better chance to recover more of my cash invested?
Finally, it is not a good time to buy a listed property from the multi list and than rehab. and refinance. You must work the off market deals, sheriff sales, short sales, internet listings and foreclosures. If you pay market price than you will have a tough time executing out in a advantageous fashion. Good luck.
Quote from @Steven Foster Wilson:
Quote from @Darryl H.:
Hello! I am first time real estate investor from California. I am looking to BRRRR in Columbus OH, in North Linden or any similar C+/B- neighborhood. My budget will be around $200K saved up within the next year to finance a cash offer and rehab.
I am planning for a 3 bedroom SFR, cash offer of 125K-150K, and rehab costs of 20K-40K. Including closing & holding costs I can be at ~170K all in, and I am guessing around 200K ARV (maybe a higher ARV? I need to get some more opinions on this too). Does this all sound reasonable so far?
With a 75% LTV I would have to leave ~20K in the deal. I think I would be okay with this since it is half the down payment of a $200K property, I would have 50K in total equity right from the start, and I get a fully refurbished property. Minimal cash flow is acceptable for me because it seems like appreciation and increased rent could work well for me long term. I also do not plan on quitting my W2 job any time soon.
Are my expectations with BRRRR too low here? I already spoke with an agent & contractor that have been super helpful with all my questions. I just cannot get the numbers to work out to fully recoup all the money I would put in. Should I just consider a different market where I have a better chance to recover more of my cash invested?I think Columbus is a great BRRRR market!
My first BRRRRR was $300k, put $50k into it, refinanced, and got $90k back. I just refinanced again and got another $50k and it still cash flows $1800/month. Second BRRRRR cost $160k, put $55k into it, refinanced, and got me just under $200k back and cash flows $2000/month.
Currently working on my 5th BRRRR in the city!
Maybe you need to be looking at some off market deals? Are you asking your agent to check your numbers? https://www.calculator.net/ren... I like to use this calculator to run my numbers
Yep! All the numbers I was hypothetically using were from my agent/contractor. One thing that makes me nervous is that the rent estimates my agent provides are usually higher than when I reach out to property managers for rent estimates. My agent does send me comps that show a comparable rent, however one property manager actually did send me a comp that showed they were struggling at the higher price range too. This makes me nervous because the margins are really tight already considering I will have to leave $20K+ in the deal, and that I am barely cash flow positive after including all expenses/repairs/capex/etc.
Did you work with property managers too? Did you feel like they were too conservative with rent estimates? I understand where they are coming from because they are trying to avoid overpromising estimated rents.
@Darryl H. Personally, I'd feel that 100/mo cashflow still seems like very thin ice (again, particularly for a new investor who presumably doesn't have a ton of resources to fall back on if things go south).
100 / mo is not much "defense" to help protect you from vacancy, capex, changes in market conditions, property damage, and all the other risks of owning a rental property...I once had a property with a finished basement (that I had to rent to make my numbers work), one month after buying the property, the basement flooded and I discovered that the slab was poured directly on dirt (a major code violation), and the dirt under the slab was so water-logged that it had the consistency of pudding. The culprit? The slab was poured far too low to the water table, and there was significant ground water in the area (even though this property was NOT in a flood zone). Suddenly, my property that had been cashflowing 1,000/month became a property that was losing me 1,900/month, and the quotes to fix the problem were over $50k. I was able to fix the problem, but the only reason I was financially able to fix it was because the solution turned the property into a place that would cashflow 1,750...if my starting point had been 100/mo cashflow (instead of 1,000/mo), it may have been financially impossible to save the property, and I would have found myself in a very, very tough situation (and believe me: the situation I was in was tough enough!)
Personally, for a standard-size single family home, I wouldn't feel comfortable with less than 500/mo cashflow--and I'd only feel comfortable with that because I have a decent equity position across my portfolio to fall back on if needed. When I was just starting in real estate (and I had no financial safety net), I wouldn't buy a property that had less than about 800-900/mo cashflow--and, having experienced all the costs of running rental properties, I'm glad that I stuck to that rule...
But again--these decisions are all in the context of the investor's overall financial position. It's one thing for Warren Buffet to buy a house with 100/mo cashflow, it's an entirely different thing for someone with $5,000 to their name, and $750/mo total cashflow to buy a house with 100/mo cashflow...Warren Buffet won't even notice if that 100/mo cashflow property has 3 months of vacancy, or needs a new sewer main, or a new AC condenser... but, the guy with $5k net worth and $750/mo total cashflow will seriously feel the pain of those types of expenses, and may quickly learn that $100/mo cashflow on their rental property was a completely inadequate defense.
So, how do you fix the problem?
One way of getting higher cashflow is to rent the property by the room (which is fairly common for college and grad students)...since OSU has tons of students nearby, you may want to look into that... Another way to increase cashflow is to change the layout of the house in a manner that boosts the rent potential of the property--for instance, by adding another br/ba, converting a garage to a master suite, creating a 2nd unit in a basement, etc.... Another way is to run it as a STR or MTR (though, this requires a lot more work than running it as a LTR)...I'd suggest searching around on the forums, podcasts, youtube etc. for content that describes how to force cashflow, and how to force appreciation.
Good luck out there!
Quote from @Darryl H.:
Quote from @Steven Foster Wilson:
Quote from @Darryl H.:
Hello! I am first time real estate investor from California. I am looking to BRRRR in Columbus OH, in North Linden or any similar C+/B- neighborhood. My budget will be around $200K saved up within the next year to finance a cash offer and rehab.
I am planning for a 3 bedroom SFR, cash offer of 125K-150K, and rehab costs of 20K-40K. Including closing & holding costs I can be at ~170K all in, and I am guessing around 200K ARV (maybe a higher ARV? I need to get some more opinions on this too). Does this all sound reasonable so far?
With a 75% LTV I would have to leave ~20K in the deal. I think I would be okay with this since it is half the down payment of a $200K property, I would have 50K in total equity right from the start, and I get a fully refurbished property. Minimal cash flow is acceptable for me because it seems like appreciation and increased rent could work well for me long term. I also do not plan on quitting my W2 job any time soon.
Are my expectations with BRRRR too low here? I already spoke with an agent & contractor that have been super helpful with all my questions. I just cannot get the numbers to work out to fully recoup all the money I would put in. Should I just consider a different market where I have a better chance to recover more of my cash invested?I think Columbus is a great BRRRR market!
My first BRRRRR was $300k, put $50k into it, refinanced, and got $90k back. I just refinanced again and got another $50k and it still cash flows $1800/month. Second BRRRRR cost $160k, put $55k into it, refinanced, and got me just under $200k back and cash flows $2000/month.
Currently working on my 5th BRRRR in the city!
Maybe you need to be looking at some off market deals? Are you asking your agent to check your numbers? https://www.calculator.net/ren... I like to use this calculator to run my numbers
Yep! All the numbers I was hypothetically using were from my agent/contractor. One thing that makes me nervous is that the rent estimates my agent provides are usually higher than when I reach out to property managers for rent estimates. My agent does send me comps that show a comparable rent, however one property manager actually did send me a comp that showed they were struggling at the higher price range too. This makes me nervous because the margins are really tight already considering I will have to leave $20K+ in the deal, and that I am barely cash flow positive after including all expenses/repairs/capex/etc.
Did you work with property managers too? Did you feel like they were too conservative with rent estimates? I understand where they are coming from because they are trying to avoid overpromising estimated rents.
Unless you have a LONG history with the agent and you trust them with your life, don't base your financial models on your agent's rent estimates (and even if you do trust this agent with your life, still don't base your models on their rent estimates).
Do your own market analyses to get an idea of rents, and then assume that you'll charge 5-10% less than the market (which, you'll often find yourself doing in order to get a tenant placed to stop the bleeding--especially when you're new and running on thin margins).
I've been working with my agent for many years, and I completely trust him on all things real estate. He's probably the most knowledgeable person I've met when it comes to residential real estate. But I still do my own market analyses.
@Leo R. Thanks again for all your input!!