Medford, MA · Member since 2008 · 122 posts · 23 votes
Hi BP Members,
Here is BRRR analysis report and I'd appreciate any feedback on it.
2 family property.
Asking price was 175K cash but owner has come down to 125K cash
ARV is 220,000
Repairs $60,000
2 x 2 bed units will rent at $650 conservatively
I have done an analysis using Hard Money to do a cash purchase at 125K and 3 month rehab and then refinancing after a year at 70% of the ARV of $200,000.
I need to get a better grip on my purchase and closing costs so they maybe off - if anyone would like to advise if I can use a % on that?
Anyway, at this price the deal still doesn't seem to make sense. What purchase price would make this a good deal and why? I appreciate any advice, still getting a handle on understanding these reports and what would makes a good deal.
Investor · Madison, CT · Member since 2014 · 710 posts · 458 votes
9y
@Dolores Waldron - You are right; this one doesn't make sense from the asking price perspective or the holding perspective.
For the refi, it helps to think backwards. Best case scenario you'll be able to refi at 80% LTV. If the ARV is $220k, that means you'll be able to get $176k out of it. So simply subtract the rehab cost (60k) from that, and you have a $116k. Now subtract closing and holding costs, and you're probably down to $100k as a reasonable asking price for a BRRRR.
When it comes to the holding strategy, $1400/mo is not a very attractive gross rent when your mortgage is for $176k. Your P+I is going to be between $900-1000, which doesn't leave you much room for taxes, insurance, and other expenses. You are likely to lose money month to month.