After listening to as many webinars and podcasts as I could fit into each day for a month, I have begun trying to find my niche and analyze my market. I want to start with SFRs before moving into small multi-family properties. My goal is to own 40 doors at minimum $200/month/door cash flow. (Is this too aggressive?)
I would like to follow the BRRRR strategy and am able to put in $15k-$20k in rehab costs (my skin in the game). I would take out a hard money loan of the purchase price and purchase/holding/refi costs for a 3 month rehab. Below is my analysis:
3/2 rents for $1900 (varies between $1800-$2300 depending on location/lot size)
3/2 ARV $300K (low end of market)
Hard money purchase @ 11%, 4 points
3 month rehab
Purchase/Holding/refi costs ~ $20k
Refi @ 7% 30year
Yearly operating cost $6000 (includes property taxes)
Unit is rented out immediately at completion of rehab
Numbers after purchase:
Average operating expenses: $500
Minimum cash flow: $200
Left over for Mortgage: $1200
Refi max: $180k
Numbers for purchase:
Hard money max: $160K
Rehab: $20k (out of pocket)
Purchase/Holding/refi costs: $20k
Max offer: $140k <----------
Purchase price to ARV: 46.7%
How do my numbers look? Am I being too conservative? Is there anything I'm missing?All the help is really appreciated Thanks!
Is the plan to refi out of the hard money loan and pull all your money back out after the "3 month rehab" using the $300k ARV? If so, something to consider is that you'll likely have to wait at least 6 months for the bank to consider that new ARV for LTV purposes.
Consider sending messages to other members which is my favorite part of the website.
@Kyle J. That's really good to know! Thanks for that.
That was the original idea. The incoming rent (assuming it rents right after rehab) would then have to cover the holding costs until I can do a cash out refi. Or is there a better strategy to defray holding costs?
@Mark Nolan I just tried looking for active members near me using Bigger Pocket's Meet page. Not too many but looking forward to making those connections.
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