[Calc Review] Help me analyze my first BRRRR deal!

[Joe Ferguson]

My partner and I are preparing to purchase our first investment deal, and after years of studying our local market and saving capital, we believe we’ve finally found the right opportunity.

The property was originally purchased by a flipper who began renovations but ultimately had the project red-tagged by the township. After running into permitting and construction issues, the seller decided to walk away and list the property instead.

Since then, the seller completed a portion of the heavy work, including:

• Installing a new HVAC system
• Rough-in plumbing (though most of it will need to be corrected)
• Rough-in electrical

The home is now down to the studs, which gives us a clean slate and, in our opinion, a solid foundation for our first BRRRR project.

We have a family member interested in financing both the purchase price and construction costs. Our plan is to complete the renovation, stabilize the property with a quality tenant, and refinance in approximately 18 months.

I work in the industry, have strong contractor and professional relationships, and plan to self-manage the property, which helps keep operating costs down.

That said, I’d love input from those who have been through similar projects.

Is there anything I may be overlooking or should be especially cautious about, given the property’s red-tag history and partial renovations?

Thanks in advance, BP — appreciate any insight.

- Joe

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*This link comes directly from our calculators, based on information input by the member who posted.

[Alex Morales]

Hey Joe, congrats on finding a project after years of studying your market - that patience usually pays off.

Kevin nailed the financial side so I'll focus on your question about the red-tag history. A few things worth digging into before you close...

First, find out exactly why it got red-tagged. Was it permit issues (work done without permits), code violations, or something structural? This matters a lot because some townships are more forgiving than others about bringing unpermitted work into compliance, while others may require you to tear out and redo everything regardless of quality.

Second, get clear on the permit status before closing. Some municipalities will let you pull new permits and move forward, others may require you to resolve the previous owner's violations first. Talk to the building department directly and ask what the process looks like to get this property back in good standing - they'll tell you exactly what hoops you need to jump through.

Third, since the rough-in plumbing will "need to be corrected" as you mentioned, make sure you understand the full scope of what's actually usable vs what gets ripped out. That can swing your rehab budget significantly.

The upside here is that down-to-the-studs means you control everything from here. No surprises behind walls. But definitely nail down the permit situation before you're committed.

One more thing - since you're getting family financing, make sure you document everything properly (loan agreement, lien position, etc.). Keeps relationships clean and protects everyone if things go sideways.

Good luck with it - sounds like you've got the right foundation with your industry connections.