Updated 7 days ago on . Most recent reply
Help me analyze this deal in Sheffield, AL
I'm new to BRRRR investing. I am in insurance adjuster, so i am able to estimate the repairs and do the contracting myself. No GC will be required for the project. I am able to do a lot of the work myself, so I can help keep rehab costs down.
This property is a small 3/1 that is in need of a total gut out. Needs new everything. It is only 1050 sq ft. I am able to do a lot of the work myself, so I can help keep rehab costs down. The house is on a lot that is big enough to be split into two lots. I would be able to build another 1,000 sq ft unit next to this one.
I just need advice about the offer price. The current owner did a contract for deed on this property and after about 20years of neglect by the occupants the property was repossessed for non-payment.
What should i offer?
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Most Popular Reply
Welcome to BRRRR, Johnny — and honestly your insurance-adjuster background is a real edge here. You can scope damage and self-perform, which is exactly the skill set a 20-year-neglect gut job punishes people for not having. Let me give you the actual math instead of just "go low," because on a Sheffield-priced deal the number is everything.
The offer isn't a guess — it's solved backwards from the refinance. In a BRRRR you don't ask "what's it worth," you ask "what can I be all-in for and still pull my cash back out." That formula is:
Max Offer = (0.75 × ARV) − Rehab − Closing/Holding/Refi costs
Plug in conservative Sheffield numbers:
- ARV: Pull 3–5 renovated sold comps within ~1 mile, same beds/bath, last 6 months. For a renovated 1,050 sq ft 3/1, Sheffield is likely $120K–$135K — and a single bathroom caps your top end, so I'd underwrite to ~$125K until comps prove otherwise.
- Rehab (full gut, "new everything"): Even doing your own labor, the systems don't get cheaper — roof, HVAC, panel/rewire, repipe, windows, drywall, kitchen, bath, flooring. Budget $45–$60/sq ft on materials
+ subs = ~$50K–$63K, then add a 15–20% contingency because 20 years of neglect hides foundation, sill rot, mold, and sewer-lateral surprises. Call it $60K all-in to be safe.
- Closing + holding + refi costs: ~$8K–$10K.
So: (0.75 × $125K) − $60K − $9K = $93,750 − $69,000 ≈ $24,750 max all-in purchase to BRRRR this cleanly (all your capital back out).
That points to an offer in the ~$20K–$30K range, and given it's a repossessed contract-for-deed property with a motivated holder, that's not insulting — it's the only number that pencils. If the seller needs more than ~$35K, the deal stops being a BRRRR and becomes a "leave money in" rental — fine, but know which one you're signing up for before you offer.
Sanity-check the rent side too: 3BR houses in Sheffield rent roughly $1,200–$1,400/mo. At ~$25K purchase + $60K rehab = $85K all-in, even leaving some in, that rent supports the deal. If your all-in creeps toward six figures on a $125K-ARV house, the cash flow gets thin fast.
Three things to nail down before you write the offer:
1. Confirm the zoning/lot split in writing — call Sheffield Building Dept at 256-386-5606. A buildable second lot could be worth $10K–$25K, but only if it's actually splittable with utilities reachable.
Until you have that on paper, value it at zero (exactly like the advice you already got — that part's solid).
2. Get under the house and into the attic before closing — that's where the neglect surprises live and where your adjuster eye saves you.
3. Line up the refi lender first and confirm their seasoning + appraisal expectations, so your "75% of ARV" assumption is real and not hopeful.
Run those numbers, make the offer the deal can support, and walk if it can't. With your skills this is a great first BRRRR at the right basis — just don't let the lot-split upside talk you into overpaying for the part you can see. Happy to look at your comps if you want a second set of eyes. 👊