Looking for a common sense check..
Just completed my first flip, looking to use profits towards my first rental. Been researching and learning anything and everything REI related for about a year now and feeling good.
Came into a offer on a 3/2 1300sqft in
Columbus GA. Not the greatest neighborhood but I think it’d probably be great for renting out.
$40-$50k in repairs
ARV = $75-$99 (clearly based of level and quality of materials, fixtures, etc..)
With those numbers I’m not feeling super confident about flipping, especially after taxes, tag and tile. Would almost be upside down.
However, thinking this might be a good first rental, especially to BRRRR ..
Comps in the area are renting from $800-$1300
Most are 3/1 so mine being a 3/2 clearly is more tangible.
I own my own construction company, so not super worried about repairs/ labor prices etc. id also be managing my self. Ran the numbers through the BP calculator and would net $800 a month after tax, maintenance, etc.. if rented at $1000am
Whatcha y’all think?!
Hi Michael, as long as you have a good idea of all your expenses i think you have a deal on your hands. Sounds like you might be able to collect all your initial capital back as well. Are you planning to hire property management?
Awesome thanks Tucker!
Yeah hypothetically I could recoup my initial invest pretty fast. However the Reno cost is what’s going to weigh on us.
As far as property Management goes. No, I'll be handling any repairs or turn overs it would need. As I've already begun contemplating opening another LLC. Specially in Property Management. 1. Because I've been thinking of doing that on top of everything, as well as home inspections. 2. That way I can write this property and ones to come, off under that specific LLC. In case of any legality issue were to ever come about.
Sounds awesome! If everything is checking go for the BRRRR! I love that strategy because, although it may seem complex, the multiple steps offer different exits strategy possibilities at any point in the deal. When I work with contractors I am typically adding some contingency to construction budget as well, usually 10%. Let us know how it goes.
I’ve looked into Columbus off and on and I am see turn around and a lot of good cash flowing properties like you! I would love to have a conversation with you because what has stopped me is not having a contractor in the area! I am currently in Atl holding 5 units (with 2 offers in currently) and always looking for the next. Let’s get together on something in Columbus!
@Michael Widick sounds like you have thought this out quite a bit. If you are keeping it as a rental than the value isn't as important unless you do the BRRRR. Good cash flow. I like it!
Your purchase price + rehab is just about your ARV of $75k. So for a cash out refinance you won't be able to take too much cash out.
Sounds good! I appreciate it!
Sounds good to me. Send me a pm and will figure it out.
Great point, I think it would theoretically go for $85-$100.. either way I believe the seasoning period is 12months. Hopefully by then I have some more capital from flips or rentals. And what equity I can take out is useful.
Most lenders do 6 months seasoning
🤘🏻I appreciate it! I’m going to re evaluate the comps in the area and do my do diligence
@Michael Widick let us know if you come up with other questions. Good luck
If you pay for it all in cash and add the rehab costs to the HUD, you can cash out with delayed financing in less than 3 months. Let me know if you wanna chat about it.
@Michael Widick If you paid for everything in cash and held it in an LLC, you could consider getting a line of credit against it and pull equity for your next purchase when you need it. Not a traditional BRRRR but BRRRR-ish. However, @Mathew Giladi I'm intrigued with your idea of delayed financing, something I'm not familiar with. Could you elaborate?
Hi, @Michael Widick !
I'd definitely go for a rental property in your case. Owning rental properties come with important benefits over fix-and-flip, mostly the ongoing stream of monthly income. There are a few significant factors which give you an advantage. You are familiar with the market which is great when you are starting our as a rental property investor. You are able to minimize both the startup repair cost and the long-term maintenance expenses through your construction company. As you're local and already in the real estate business, managing your own property will further lower the monthly expenses. Overall, this is quite a good recipe for success.
Moreover, my team has currently conducted nationwide analysis of long-term rentals across the US. Columbus, GA offers a city-average cap rate of 3.1%. While this does not sound like a lot, it is comparable to what we see in top markets at the moment. So your market is a good one to invest in right now.
Good luck and keep us updated on what you decide!
Dude super interesting, not familiar with the idea though. Can you expand?
Awesome! thank you! I did a walk through today with a inspector, everything checked out, going to have the pipes scoped to ensure nothing crazy is going on. If that checks out.. then it’s demo time!