BRRRR on an occupied section 8 unit
I'm looking to enter the world of real estate investing with the BRRRR strategy. I have around $150k from a HELOC on my primary as capital. My agent send me a 4 bd 1 bath 840 sqft. It's currently occupied with a section 8 tenant with under market rent of $950. I've been told the owner has never requested an increase. The fmr is $2000 but My agent thinks it's more likely to get approved for $1400-$1500. Asking price is $105k. Comps are putting the ARV at max $150k. The agent thinks the seller would sell for $85k. It needs about $24k. I'd be paying 11%interest on my heloc. I'm intrigued by the fact that it's already occupied and that there will be income on day one and That I can start immediately with that rent increase request. The numbers came back at a $7500 profit on the BRRRR max. But I might get great cash flow if I could get the fmr rent rate. The interior rehab may be tricky with tenants being as there's one bathroom and I'd also do the kitchen. Your thoughts.....
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#5 Out of State Investing Contributor
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#5 Out of State Investing Contributor
- Real Estate Agent
- Columbus Cleveland Dayton, OH
Hey Shlomo — sounds like you're doing some solid due diligence already. The day-one income is definitely appealing, especially on your first BRRRR, but the tight margin ($7,500 profit max) would give me pause, especially with a 11% HELOC rate and rehab complications with a tenant in place.
Section 8 rent bumps can take time and aren't guaranteed to hit FMR, so I'd run your numbers using the more conservative $1,400. Also consider how delays in the rehab (since there's only one bathroom) could affect your refinance timeline.
If the seller really will go for $85K, it might still work—but I’d stress-test it with lower rent and longer rehab just to be safe. Appreciate you sharing the details, and would love to hear how it turns out if you move forward!