New Jersey, NJ · Member since 2015 · 327 posts · 137 votes
Hello everyone, I have a question to all investors who use the BRRRR strategy and the kind of rehab you would do.
1- would you go all out full gut renovation on your rehab?
OR
2- would you do a patch up and repair just enough to get it done fast?
As a contractor I always prefer a full gut but it does eat away the rehab cost and takes longer but no stress about plumbing, leaks, electric, lead paint and etc in the future.
The patch up would cost less, fast timing, but then you are gambling with what's behind the wall and hoping nothing happens in the future.
I assume most house that are purchase for BRRRR purpose are in distress/bad condition and old on some occasion.
What rehab number would you go for?
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
Only as much as it needs to be acceptable as rent-ready. Meaning, the original "deal" needs to good enough for its new appraisal after a minimum rehab to allow you ALL your cash back on refi!
After all, the strategy has you buying properties to ONLY be rentals. All the best with it. Cheers...
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
Only as much as it needs to be acceptable as rent-ready. Meaning, the original "deal" needs to good enough for its new appraisal after a minimum rehab to allow you ALL your cash back on refi!
After all, the strategy has you buying properties to ONLY be rentals. All the best with it. Cheers...
Software Developer · Vidor, TX · Member since 2015 · 922 posts · 639 votes
10y
Dual income middle class families can afford quite nice rentals. That's still a fairly big range you speak of. If you're dealing with middle class family rentals I would do things that are necessary:
Remove any carpet in bathrooms, Remove any dirty carpet and replace with tile or laminate. Make sure the kitchen and baths are in good/excellent shape and visually pleasing. Maybe even converting from a 2 bed to a 3 bed. Good fresh paint job and cleaning.
If the house is lower income then a larger expense on renovation will most likely not be inline with the return. So I would still remove any carpet in bathrooms but only deep clean dirty carpet (if possible) and just make sure the kitchen baths are functional. Good fresh paint job and cleaning.
You need to get on facebook or any local real estate websites and see what places are renting for and in what condition. That will give you a better idea. Some places for the market rent expect wash/dryer and fridge, others don't. Some provide water/sewer and trash, others don't.
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
Given the "range", perhaps make your decision based on the percentage increase in gettable rent vs the percentage extra it's costing ie. Whatever percentage rent per month you can get for a minimum rehab, aim to only spend extra IF its higher rent return at least maintains that percentage?