I need guidance BRRR or flip

3 Replies

My partner and I have been looking for our first deal, here's what we are putting offer on today:

Twin, 3bed 1 bath, 1100sq ft, asking 85k, rehab 40-50, ARV 180-200, potential rent 1300-1400.

The plan is to buy the house using cash, then take HELOC for either this property or our own houses and use HELOC money for rehab. (is this a good idea?)

So here comes the tricky part, in the best case scenario we should be able to get all of our money back and have a small cash flow from BRRR, but stars must align for it, max rent, min rehab, max ARV... On the other hand, even with average numbers flip should produce at at least 20k+ in profit.

Ideally, we would like to keep properties and generate passive income, but with this one it doesn't seem to be the best option. 

What would more experienced investors do in this case?

@Yuriy Grytsulyak . What do you mean by "twin"... do you mean duplex? Yes, you can use HELOC monies for construction if you intend to refi or sell.

What is your cashflow if you held? BTW, you don't have to take the max loan... work the numbers if you just get your own money out. Is this a good area will properties sell quickly?  Basically, do you have 2 true exits?

I'm a cashflow gal... sure, I'll flip to build capital, but in the end, I want cashflow. If I had a property that I would like to hold, but at the end of the day made more sense to flip, I'd snag it and complete the project and see at the end where the market was.  I win either way!

@Yuriy Grytsulyak - it all depends on you, your goals and your current financial situation. If you need money NOW, then flip. If you have other sources of income and your goal is to build net worth over time, then hold. Keep in mind $20K sounds like a lot but flip profits are taxed heavily because they are short term capital gains. So make sure you're comparing apples to apples. $14K vs monthly cashflow? Do the "stars have to align" to get that flip profit?

@Yuriy Grytsulyak

Don’t count on stars aligning for either the rehab coming in under budget or appraisal coming in over expectations. How important is it to you to get 100% of your cash back out vs say 95%?