Rehab for a buy and hold

[Bret Blackburn]

According to BRRRR strategy this home wouldn't work. But I wanted to hear the feedback from the forum. I'd be buying to hold and renting

Purchase Price $145K

Rehab $25-$30

ARV $190K

Rent $1700

I have a lender that will loan the purchase and rehab price at 11%.

Is this is a bad deal to pursue

[James C.]

Originally posted by @Greg Moritz:

@James C. If you don't mind, could you step through your calculation a bit more? What is ROT? Why are you multiplying (ARV-1.5xHighEstimate) * .7?

Greg,

 ROT = Rule Of Thumb 

Also, if I don't have actual estimates for rehab, I add in a 50% "fudge" factor. Another ROT is that you shouldn't pay any more than 70% of ARV (as repaired value) minus rehab costs.

So... ARV - 1.5 X rehab costs then multiply that result by 70% to come up with the maximum offering price.

These numbers are just a quick look at a deal to see if it's worth spending additional time to dig deeper into the numbers.