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This is my 1st BRRRR deal, and I'm trying to figure out if I'm analyzing this correctly. I'm going to be assuming the loan (they own the dept, I own the deed, and keep the existing loan in place.) The existing loan is 93K. Property is worth, at the very least, 160K after repairs. Needs about 25K in rehab. Am I running these numbers correctly? Thx in advance!
Are you sure no down payment needed?
The number seems to be reasonable.
I think in general the numbers look good. I would definitely verify the upfront cash needed.
It all depends on personal preference and condition of the home but for me the maintenance and capex % is a touch low. It doesn’t look like much but it adds up over time.
My other question is the 8% or management. Have you found a company that will do it for 8% or do you plan on self managing and have just built that in? Pretty much everyone in my area charges 10%, especially for a small portfolio.
On another note, I love Peachtree City. I have family in that area and my wife and I hope to settle near there in the future!
@Jimmy Huynh - Thx for the reply. Yes - there is no down payment needed. The owner just wanted this property off his hands. He didn't have the $ for fix up needed. The up front cash needed is fix-up costs and and closing costs.
@Scott Hensley - Again, thx for the reply. Yes - I'm managing the property and wanted to build in something for my time. And that's awesome about your fam near PTC. We live just outside in a smaller area called Brooks. We love it here! If you find yourself in the area, would love to connect!
Howdy @Mike Williams
I would not do this deal as you have it currently.
Why do you want to trade a loan with lower interest rate and lower mortgage payments for one that is higher in both instances.
I think your Cash Flow may be a little optimistic.
Did you include Holding Costs in your Rehab estimate? Will the property be vacant during the Rehab? If yes, you will have to cover monthly expenses such as mortgage payments, insurance, utilities, HOA fees, etc. That can add up over a 4 month Rehab period and up until the property is fully rented.
Hey @John Leavelle - Thanks for the reply and for the insights! It's a duplex, so one side will be rented while the other side is undergoing rehab. I've included the holding costs in estimates. The reason for the loan trade-off is so that I can get my cash back after the refi. Although it's a higher interest rate (estimated) and higher payment, I'll have no cash in the deal at that point. Thoughts?
Again, thank you for taking the time to help and respond. Much appreciated.
@Mike Williams I understand getting back most of your cash back. However, this deal does not come close to acceptable cash flow for me. You are using less than desirable amounts for CapEx, R&M, and PM. You are not counting on the other miscellaneous expenses that do occur and can add up to another 5% to 8% more. Make sure the numbers decide the deal and not your desire to get a the property.
@John Leavelle - I really appreciate your advise and taking the time to reply. It's a subject-to deal, so I'm still working thru the terms, but I will definitely take all that you've said and apply it. Thanks again!