Structural repairs and BRRR Strategy

2 Replies

We are under contract on a new deal 3/1 for $115k and just had our inspections today. We knew it was a fixer upper that needed major work but the inspectors found more termite damage than anticipated and even evidence of a previous fire. Structural repairs will have to be made in the attic and crawl space. We planned to put about 30-40k into it to open up walls, remodel the kitchen and bathroom and possibly even add a bath. If we have to spend $15-20k on structural repairs, there isn’t much left for the ‘value add’ items that will bring up the appraisal. Should we walk away or will an appraisal pickup structural repairs?

If you had an inspection contingency built into your contract you probably have an out and the only money lost will be the money you paid for your inspection. All of your earnest money should come back to you if you want to walk away.

The appraisal may or may not pick up the same issues. Appraisals are way less in depth and more of a quick look through and comparison to comparable sales to establish a value.

I would be worried about whether or not the deal still works for you. If this will still cash flow or profit as a flip after the additional repairs you might still want to move forward. If you don't like the numbers now or think you may only break even I would would probably walk away and take my earnest money back.

I can tell you that unless the structural damage and subsequent repair is obvious, it will not be a factor in an appraisal. If it is obvious then a good appraiser should see it and adjust comps accordingly. you could also use this as a reason to lower the sale price, but be careful, if you try to renegotiate the seller has the right to walk away at that point also.

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