I recently watched the webinar on analyzing a property, so i thought i would give it a go in realtor.com. The property is close to where i live, but looks like needs a good ol' renovation before being ready, so i thought i would give the BRRRR calculator a go.
The property is here; https://www.realtor.com/realestateandhomes-detail/...
Here is the calculator; https://www.biggerpockets.com/brrrr-calc/550487 My questions are - how far off was i? And also - the taxes look like they would be more than the P+I payment after the refinance, is this normal in some areas/properties? It looks to me like it would be a terrible deal even with the low cost of the home, unless i'm incorrect in some of my estimations.
Thanks! (And feel free to call me a complete moron after seeing the info i put in the calc! Ha)
I flipped and held a similar property a few years ago. 100 years old, needed complete gut job. Spent $30k in materials and did all the work myself. After all said and done, I probably broke even. I don't regret doing it, because I learned a lot and it was a good way to spend my free time. But I wouldn't do the same thing again.
If you're trying to look at potential comps, here's one:
Assuming you can pull in about the same in rent, you'd have to keep your rehab under $50k, which may be difficult.
Thanks for the reply, Jack! What kills the deal, just fact that it's 100 years old, and needs a lot of work? And thanks for the comp, i actually looked on craigslist and saw a bunch of 3bd, 1 bath rentals for 900-1000, so that's where i got my 950 from.
I didn't put in there that your link to your calculator doesn't work, so I was spitballing.
If you were using $950/mo, then that makes it even more difficult.
Using the basic 1% rule, the property would need to be worth $95k to generate $950/mo. That means at $50k purchase price, I'd be limited to a $45k rehab on a 100 year old home. Not sure that can be done correctly without cutting corners, or doing all the work yourself.
Also, I still own my old home, and it provides a little cash flow, but of all my properties, it has the most turnover. My maintenance costs are low because my father lives next door, and is handy with small repairs. If I had the PM do it, it wouldn't be worth holding onto.
Old homes create a lot of unforeseen problems, which make tenants less likely to renew their lease. They are colder in the winter, which either cause high utility bills, or tenant discomfort, and both influence tenants to leave. Unless it's rehabbed correctly, they aren't as attractive as newer homes, and will sit vacant longer. Also in play is the small town. Generally speaking, it's harder to fill vacancies in a small town because there is not a lot of demand. You have to be very competitive to convince someone to live there, instead of, say, Lancaster.
Simply put, from a strictly financial perspective, I'd rather invest my money in something more profitable. However, if I were looking for something to work on as a hobby, then that looks like a lot of fun.
Thanks Jack, i appreciate the insight!
The calculator link doesn't work for me either