This is my first post on Bigger Pockets! Hello everyone! I am very new to all of this and learning a lot by attending TREIA meetings, webinars, reading books etc.
It's exactly what I thought would happen. I have analyzed so many properties that were not deals, that I don't believe the numbers (i.e. I think I'm doing something wrong.) when one comes out looking like a deal. I used the BRRR calculator.
It is duplex that is currently vacant and in pretty bad shape. I have more details on the numbers I used, but I am looking for a sanity/idiot check. Even if I don't go for this one, it would be great to know if I'm on the right track.
I'm looking at doing 10% down on the first rehab loan and then refinancing at the standard 20-25%.
It'll be tough to do a sanity check without knowing some of the numbers that you're running :)
So it is listed at $65k purchase price. Looking at the limited pictures, I would guess at least $35k per unit for rehab - make sure you take a contractor through the property and get a better estimate!
So to check your sanity:
1. What rehab are you estimating?
2. Are you planning to refinance and hold?
3. If so, what is the average rent in the area? The listed rent on Redfin seems low
I estimated $50,000 for rehab. I'm making some assumptions for sure. Like I'm assuming roof and foundation are ok. But, I'm thinking that would cover the interior basically gutting and redo. Any electrical issues, since it is older. This I would say is my weakest estimating area as a new investor.
Yes a refi and hold would be the plan.
Looking at the area rents I think we could get at least $800. Possibly $850.
Have you ever bought a home before? If not, have you considered doing an FHA 203k mortgage? You get to buy into the house with low money down AND you get to roll $35k worth of rehab into the loan.
As for whether or not it's a good deal. I would run some comps to see what a fully fixed up comparable property is worth in your area and see if it would cash flow fully rented. It would also be worth it to have an inspector or a couple contractors go through it and give you some bids so you know what you're getting yourself into.
Michael Ablan great idea about the 203k loan.
Kelsey Nigg a couple things to keep in mind if you do this as I have done one myself. You will need a contractor to do the work or pass the checks from the bank to you. I paid a small fee to the contractor that did mine. The bank will require inspections for payout but these will not be done by the contractor. What will need to be done by the contractor is a repair estimate and cashing/reissuing the checks.
Also, if you are trying to do the work yourself, you will need the repair funds in reserve as the bank will not release funds until work is done. They do allow a limited number of draws and work must be done in 60 days from close so don't bite off more than you can chew.
Finally, this is an FHA loan so you will have a one time 1.5% fee upfront and PMI for the life of the loan which is charged at a higher rate than PMI on conventional loans. Prepare to refinance this loan quickly into a conventional loan.