Would you pull the trigger on this BRRRR?

Question

BRRRR opportunity I'm considering:

$250K purchase$150K rehab$540K ARV$200/mo cash flow on rent on 30yr mortgage

I have personal reasons for wanting to make it happen but am afraid it's clouding my judgement. Would love to hear any thoughts on the raw numbers here. This would be my first BRRRR, but my third rehab.

Thanks!

Vijay Friedman · Answer

@Jared BeasleyThe ARV spread looks attractive, but I'd spend extra time stress-testing the rental numbers if projected cash flow is only around $200/month. The refinance exit may work well, but I'd want confidence that the property still performs if expenses or vacancy come in higher than expected. Feel free to click Contact Us, check out our website, or give us a call if you'd like to discuss the scenario further.

Caleb Brown · Answer

Looks interesting. From the cashflow perspective it is thin compared to the price point. What area class is it in? If it's in a nicer area than tis is realistic to find, you'll see your cashflow grow as time goes

JooYung Choi · Answer

What's the appreciation potential of the property? If strong, then yes! BRRRR away.

$200 / month might not be a lot but at least you are not coming out of pocket. If you think in 10 years, your property will appreciate 100K+, I personally would hold it for the long run. Rates will fluctuate during that time as well, so you could cash flow more.

Jacob Sloop · Answer

@Jared Beasley  Give me a shout if you want any second opinions , I'm an active agent in the area

Marcus Delgado · Answer

$400K all-in on a $540K ARV gives you a 26% spread, which isn't bad. The thing I'd want to know is what DSCR rate you ran that $200/mo off of.

If you're at 7.5-8% on the refi, 75% LTV on $540K gets you about $405K. So you'd pull back close to what you put in, which works for the BRRRR side. But $200/mo is thin. One insurance quote that comes back 20% higher than your model, or your refi settles at 8.25% instead of 7.5%, and you're at breakeven. That's killed a couple deals for me in Florida just on that single line.

The "personal reasons" part is what I'd flag more than the raw numbers honestly. That's usually when you start making the deal work instead of deciding if it works.

What are rents actually trading at in Norfolk and did you pull a real insurance quote yet?