Updated over 5 years ago on . Most recent reply
Level of Rehab for a BRRRR
Sup Folks,
About to close on a 3/1 REO as an owner-occupant for 190k(cash), current county assessment is 220k, ARV is about 325k and I plan on BRRRing. House is from the 60's and has a 15 year old roof. House has an illegal bathroom and illegal room extension. Ive done a sewer scope and normal house inspection and the estimated costs seems to be 20k from the inspection reports( will probably need to do a gut job). The floor plan is pretty bad but I have some good ideas on the rehab, but Its my first one and I'm at a crossroads. Its clear for rentals you don't want to spend too much on the rehab as long as you cashflow, but I don't know what the appropriate threshold is for a BRRRR because you want a higher appraisal and for the cash out refi and still cash flow at the end of month. I also don't know what To do about the code violations and how that'll effect the appraisal. Any advice?
Most Popular Reply
When you are employing the BRRRR strategy the ARV is critical. The appraisal can make or break you. I tend to rehab them flip ready. There will be disagreement on this philosophy, but by taking the rehab to this level it provides higher ARV, higher rents and better quality tenants. If you conduct a quality rehab the code violations should get addressed. Get a copy of the code violations to avoid any surprises.