BRRRR rehab strategy

9 Replies

Hey guys -- I'm actively seeking a BRRRR opportunity in Northeastern PA (NEPA). A common theme among the homes that would qualify as a BRRRR opportunity are that the properties would be very aged and typically need and entire gut job to be done correctly.
Knob and tube wiring, old plumbing, beat up plaster walls.
My question is - when evaluating a BRRRR deal with similar circumstances, do you guys plan a full on gut, or more cosmetic, accepting a lower rent?
I understand that there are many answers and it will depend on if the property can cash flow with a full gut rehab and be able to refi. But I guess for me I'm having a hard time knowing that in such an old house you're just hiding the old issues by dressing it up. I would prefer to completely gut and redo the property the "right" way.

Thoughts?? Experiences?

A BRRRR deal kind of implies a long term hold so id recommend doing what you said, "completely gut and redo the property the "right" way."

Youll have less CapEx, Repairs, and headaches this way.

Just make sure you get the rehab numbers right before you go for it and make sure they work out with the BRRRR calculations.

My wife and i have done 3 total Brrr gut jobs. Bought 2 homes for $25,000 each and 1 for$40,000. I do a lot of work my self, but on plumbing and electric i get a pro. We usually put $15 -$20k in each house. The result has been refi appraisals that are at $80,000 each, i get $850/ month rental and I get very good renters.

Your on the right path by doing it right. But buying the house right and getting your numbers on rehab cost are key here.

If the house needs a "total rehab", then do it now. It will benefit you in many ways, such as less capex, repairs etc. It will also benefit your house when you get it appraised on the refi. The appraiser should come in higher with all the upgrades. And depending on your market, you may even demand a higher rent. To me, its a no brainer. Good luck!

@Wayne Holliman Thanks Wayne for the reply. 

I think a lot of my questions regarding the BRRRR strategy revolve around the response you gave.

I'm having a hard time understand how a full gut of any size can be done for 15-20K.

My wife and I recently completely gutted our 2100SF home, and aside from the higher end finishes, we were looking at 50K easily. Electric, plumbing, drywall, etc..

I think this is where I'm struggling to see the ability for this to be done correctly, properly, and effectively.

@Nicholas Lohr

@Joseph ODonovan

Hey Bryan,

Our houses are about 1250sf each. I can do tile work, paint, redo cabinets and carpentry work. So it's about the same if you double the size of the house.

It takes longer to get the house on the market, but my profit is great and I enjoy the work.

@Bryan Zayac when using this strategy the increased repairs should increase the value accordingly or the deal doesn't work. When I was heavy into the BRRRR strategy, before it had a cool name, I was rehabbing close to flip condition using less expensive materials where I could to achieve a comparable property to the flip houses in order to get the best value on the refi. As also mentioned I am fixing anything that will create an issue down the road. But items like knob and tube or old plumbing might be less marketable, it won't affect the value of the house in comparison to the cost to remediate.

@Bryan Zayac , I'm looking at some properties for buy & hold- mostly small multifamily in NEPA also.  Question for you - How do you know if the houses have old plumbing, old wiring, ect.  Do you have experience in electrical/plumbing yourself or do you have a trusted contractor, ect. that can advise you?   In general can you estimate based on the year it was built?  

Most homes I've looked at were built between 1910-1930, trying to estimate if these will likely all need to be gutted to be done "correctly" - meaning lower maintenance headaches for me in the future.  

Any advice from your experience appreciated!

Originally posted by @Amy Engelhard :

@Bryan Zayac , I'm looking at some properties for buy & hold- mostly small multifamily in NEPA also.  Question for you - How do you know if the houses have old plumbing, old wiring, ect.  Do you have experience in electrical/plumbing yourself or do you have a trusted contractor, ect. that can advise you?   In general can you estimate based on the year it was built?  

Most homes I've looked at were built between 1910-1930, trying to estimate if these will likely all need to be gutted to be done "correctly" - meaning lower maintenance headaches for me in the future.  

Any advice from your experience appreciated!

 You need to have a contractor walk the property with you and give you a bid on the rehab.

@Amy Engelhard  

@Brian Garrett is correct: you should try to see if a contractor can walk the property with you and give you a bid based on his or her walkthrough. 

The problem is that often times that is not possible for various reasons. For example, good contractors are in-demand and are often busy. So if you are taking a look at many properties, it's not always realistic to expect your contractors to visit the property with you every single time. You thus need to tailor your strategy a bit depending on your situation and your relationship with your contractors. As you get more experience, you can start to develop a general sense of what you need to budget. 

Electric and plumbing can be tricky. Even if you have good electricians, plumbers, and/or inspectors take a look at the property, there are likely going to be issues they cannot discover without basically gutting the property. If those issues result in a substantial loss, you will likely need to rely on insurance to cover it. So you want to work with a good insurance broker there. 

If the loss isn't great, then often times you are better just paying the costs out of pocket. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it as legal advice. Always consult with your attorney before you rely on the above information.

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