Looking to do my first BRRRR

[Lance Lamberton]

I am looking to do my first RE deal. Despite its inherent risks I'm looking to do a BRRRR strategy because I do not have the capital to put down. Ive looked at a few areas and settled on Birmingham, Alabama.

Here's my ideal deal

Purchase: $60k

Closing: $2400

Rehab: $35k

Holding costs for 6 months: $8000 - estimate for interest & utilities. 

All in $105,400

ARV: 145,000 to 155,000

Here's the question(s): 

1. Does anyone have any experience in this city, and know if these numbers are possible? 

2. Are there any areas in Birmingham, Al that I should consider/ Avoid? 

3. Feel free to recommend other cities as well. 

[Luka Milicevic]

Without knowing the market, finding a 60k home is either going to be a very difficult deal, or in a really bad area, or a complete tear down. 

A 35k rehab should take you 2 weeks and not 6 months. 

[Jaron Walling]

Agreed with @Luka Milicevic the holding costs are way too high. We remodeled a SFH last year for $23k and spent a couple hundred dollars holding it for 3 months. Property taxes were like $370 + small amount of utilities (empty property).

[Andrew Fair]

In general, 60k is going to limit you and cap ARV's in those areas. A quick zillow search shows that the areas with 60k homes would not have the ARV's to support what you are looking for. I would suggest buying something 80-100k with a higher ARV.

[Lance Lamberton]

@Andrew Fair, thanks for your reply, I see you are an agent in Birmingham. What neighborhoods should I be looking at in Birmingham? And what should my target Purchase price and rehab cost be for the area? I would love your guidance on this. Thanks. 

[Ashley Stevens]

One of the great things about investing in the Birmingham market is that it is still so cheap compared to other metro/cities. Of course, the target price will vary based on the neighborhood though. 

[Dave Vona]

@Lance Lamberton I'm not familiar with the Birmingham market, but I've been using the ...research/data section on zillow to do initial analysis on my out-of-state market.  I can run a report showing a home value index down to the zip code or even neighborhood.  I don't consider this an absolute "price", but more of a relative number.  This can inform me when deciding which areas of town to look at.

If I combine this with the rental data on the same zillow page, I can also come up with a relative rent/price ratio.  Also, remember that you'll want to purchase at a discount, so the home values you see in the report are just a starting point.

[Dan Portka]

@Lance Lamberton I've done a few deals in Birmingham and I rarely ever see a deal with that type of spread - you either found a home run or your numbers are off. What zip is the property in? Just judging based on the ARV its likely in a decent neighborhood, but there are a lot of areas in the city I'd personally avoid.

[Franklin D.]

Good evening,

Let me preface this by saying while I'm not new to bigger pockets I am new to implementing these practices. 

Good work on the numbers it looks like. Always be conservative. Start searching for deeply discounted deals. Contact realtors, wholesalers, join Facebook groups (REIs, investment groups, real estate groups), search the Facebook marketplace for deals, look at Craigslist, and ask everyone you interact with (get good at idenitfying scams for all of the methods). Be patient, when you see the right ball hit it out of the park. Analyze every deal you can find until you can analyze them just by looking.

Even if you find a good deal be willing to walk away and not get attached.

Find a mentor with properties and find a way to add value to their life in exchange for information.

[Cody Mitchell]

Hey Lance, my wife and I have done two deals in the Birmingham area. My father in law also invests there so we have a little bit of experience, but obviously not a whole lot. To answer your questions;

1. Yes those numbers are possible, but are going to be very very difficult to find in a decent area in Birmingham. If you had some good wholesaler contacts would be the best way, but a deal like you're describing is going to be grabbed up quickly. 

2. Overall, I'm not sure what your goals are but I basically avoid the west end side of Birmingham (Fairfield and that area) and downtown as well. Those areas see a lot of crime and while the prices may make them look like good deals, there is a reason for that.

Feel free to shoot me a message if you have any other questions, and good luck!

[Chris Momongan]

Those numbers are possible where I am in Augusta, GA. My last deal was 75k all in with ARV 155-165. I cash-flow about 600/month because of Master's Rentals and furnished mid term rental market here for medical professionals. It was most people consider a questionable area, but one street over is a good area which Augusta is weird like that.

[Farley Youman]

Lance:

Based off of your numbers, it looks like a good deal.  I would always suggest having another 10K cash reserve somewhere at the minimum for renovations- in case you need it for a surprise cost that you did not see coming. Assuming you get a loan, lenders do not normally like it when you come back after setting up the loan and ask for more money. Thus, in this case, you would have to come up with the money.

Since you said you do not have capital, and no one above addressed you getting a loan: Based off of the 95K on your expenses and an ARV of 150K, your LTV is 63%. Virtually every lender on fix and flips is doing 70 percent if you do not have experience, and 75% if you have ample experience. Thus, assuming your numbers are correct, it appears you have a good deal here.

Please let me know if you have any questions. Thanks.

[Dylan Thomas]

@Lance Lamberton Hey Lance! I saw this post a little late and wanted to see what you ended up doing? Did you find a deal in Birmingham? Are you still looking? Would you be open to other areas in Alabama like Mobile? I work the Mobile area and would love to talk to you about the possibilities we have in this area.

Send me a message if you would like to discuss it further!

[Dane Dell]

@Jaron Walling hi, I’m researching this strategy as well. Just curious what the scope of your remodel project was. Also what area do you invest in? Thanks!

[Jaron Walling]

@Dane Dell Circling back to this post. I suppose if the OP is using HM the holding costs could be a lot more. We haven't utilized HM and given this market we don't plan too. 

We invest and live in Indianapolis. It's a growing market. My experience is with distressed SFH. 2/3 bedroom, 1 bath, 2-car garage. The uglier the better. More opportunity for value add. We aim for quality rehabs and avoid fire, flood, or major foundation issues.

[Jonathan Aversano]

If you're open to anywhere in the US, Ohio is a great state to be in. Landlord friendly, affordable price points, and high rent demand. Columbus is a great mix of cashflow and appreciation, in a city primed for appreciation. Cleveland also a good market for cash flowing investment properties. I am confident both markets would offer you good options for a BRRRR.

[Anthony L Amos Jr]

Quote from @Lance Lamberton:

I am looking to do my first RE deal. Despite its inherent risks I'm looking to do a BRRRR strategy because I do not have the capital to put down. Ive looked at a few areas and settled on Birmingham, Alabama.

Here's my ideal deal

Purchase: $60k

Closing: $2400

Rehab: $35k

Holding costs for 6 months: $8000 - estimate for interest & utilities. 

All in $105,400

ARV: 145,000 to 155,000

Here's the question(s): 

1. Does anyone have any experience in this city, and know if these numbers are possible? 

2. Are there any areas in Birmingham, Al that I should consider/ Avoid? 

3. Feel free to recommend other cities as well. 

 Towns like Toledo and Dayton, OH will fit your buying criteria. Both are really good cash flow markets with affordable price points. Ohio is a landlord friendly state as well. I'd be happy to share more info

[Jimmy Lieu]

Quote from @Lance Lamberton:

I am looking to do my first RE deal. Despite its inherent risks I'm looking to do a BRRRR strategy because I do not have the capital to put down. Ive looked at a few areas and settled on Birmingham, Alabama.

Here's my ideal deal

Purchase: $60k

Closing: $2400

Rehab: $35k

Holding costs for 6 months: $8000 - estimate for interest & utilities. 

All in $105,400

ARV: 145,000 to 155,000

Here's the question(s): 

1. Does anyone have any experience in this city, and know if these numbers are possible? 

2. Are there any areas in Birmingham, Al that I should consider/ Avoid? 

3. Feel free to recommend other cities as well. 

Hi Lance, I personally love Columbus Ohio and as someone who works with a lot of out of state investors - there's so many catalysts for why you should invest here. Specifically, there's job growth (Intel, Honda, Amazon, Nationwide, etc) and the population is growing (unlike Cleveland or Cincy). I really see Columbus Ohio as an extremely safe bet for the next 10-20 years. Plus, there's still so many positive cash flowing and 1% deals here in Columbus Ohio. Just this month, I’ve gotten under contract for my clients for multiple 20%+ cash on cash rental properties so there’s definitely tons of opportunity here. As a local investor and agent here in Columbus, let me know if you have any questions or want to connect!