Help Me Analyze This BRRRR / Flip Opportunity

7 Replies

I own several rentals and am tryign to get more into rehabbing and BRRRR or Flip. I've done light rehabs but this one will be much bigger. Here are some details followed by some pictures.

Yr Built: 1975

Sq Ft: 2250

3 BR / 2 BA

.75 acres

Easy highway access in top school district in the area 

Asking Price: $126,000

ARV: $205,000

House on the same block from same year and same size / configuration sold for $205,000 18 months ago

Key Issues:

- Foundation - common in this part of texas for this age.  Cracks in bricks outside and in the ceiling

- Wood paneling throughout

- Needs new roof

- A/C probably should be replaced

- popcorn ceilings throughout

Comes with a shed out back that needs some work but could have some appeal

I'm thinking this has at least $50,000 worth of work


- $15,000 foundation

- $10,000 roof

- $5,000 kitchen

- $2,000 un-popcorn the ceilings

- $5,000 replace wood paneling

- $13,000 general other things I'm not thinking of but will happen

What are your thoughts?  Would this be a good deal?

Here's the pictures

$126K+$50K=$176K all-in cost.

If you sell for $205K you would make $31K gross profit. 

Are you going to use an agent to sell? If so, you will pay between $5K (flat rate) and $12K (6%) in commission. This reduces your profit to $26-$19K .

How fast do you want to sell? If you buy it with hard money loan your clock is ticking and you may not sell at the highest price. 

Also, the cost of hard money ($5K easily) should be added to your basis making your potential profit even smaller. 

On the flip side, how precise is your repair estimate?

Does is really cost $15K to fix the foundation? Did you get this number from a foundation company? 

Same with the rest of the list.

Maybe it's enough to spend $20K to make it rent quality instead of retail quality and sell for $175K to a rental operator or keep for yourself. 

I know it's a "non-answer" but I hope it would stimulate your creative thinking. 

Originally posted by @Nick B. :

$126K+$50K=$176K all-in cost.

If you sell for $205K you would make $31K gross profit. 

Are you going to use an agent to sell? If so, you will pay between $5K (flat rate) and $12K (6%) in commission. This reduces your profit to $26-$19K .

How fast do you want to sell? If you buy it with hard money loan your clock is ticking and you may not sell at the highest price. 

Also, the cost of hard money ($5K easily) should be added to your basis making your potential profit even smaller. 

On the flip side, how precise is your repair estimate?

Does is really cost $15K to fix the foundation? Did you get this number from a foundation company? 

Same with the rest of the list.

Maybe it's enough to spend $20K to make it rent quality instead of retail quality and sell for $175K to a rental operator or keep for yourself. 

I know it's a "non-answer" but I hope it would stimulate your creative thinking. 

 Thank you for the thoughts. Yes I believe my estimate could be conservative. 

I also may be overestimating what I could sell it for but l, as always, these are just educated (hopefully) guesses. 

All good things to think about and thank you for your thoughts 

Howdy @Steve S.

You did not provide rental income information. What are the rates like in the area? This does not look like a good BRRRR deal based on the numbers you have provided. With an ARV of $205,000 your All-in Costs should be closer to 70% ($143,500) to 80% ($164,000) depending on what Refinance LTV you can get. Meaning purchase of $93,500 to $114,000 or a lower Rehab costs.

Originally posted by @John Leavelle :

Howdy @Steve S.

You did not provide rental income information. What are the rates like in the area? This does not look like a good BRRRR deal based on the numbers you have provided. With an ARV of $205,000 your All-in Costs should be closer to 70% ($143,500) to 80% ($164,000) depending on what Refinance LTV you can get. Meaning purchase of $93,500 to $114,000 or a lower Rehab costs.

Rents in the $1400-$1600 range.  I think I'm overestimate my rehab costs but also trying to consider a worst case scenario in my numbers as well.

when i do the cash out refinance, how do i calculate my cash on cash return?  For exmaple:

Purchase price (in cash) - $120,000

Rehab (all costs) - $40,000

All in costs - $160,000

ARV - $205,000

Cash out refi at 70/30 - $143,500

Given that I'd have a net out of pocket of $16,500 and a $143,500 mortgage for 30 years at say 5.5%

Monthly rent of $1,400 would give me annual gross rents of $16,800

Property Taxes would be about $5,500

Insurance of $1,000

Mortgage payment of $818/month

Gross expenses of $16,316

Does that all seem right?  That wouldn't be a good deal obvious but want to make sure my model is correct.

Seems like this would be a better flip deal if my ARV is accurate and I can reduce my costs any for rehab.

@Steve S.

For calculating CCR using the BRRRR strategy it is still basically the same. The main difference is you are including more costs into your cash invested. The following should be included;

Acquisition costs (Deposits, cash purchase), Rehab costs, Closing costs (Purchase, Hard Money Loan Points, Refinance Fees), Holding Costs (Mortgage payments, taxes, insurance, HOA fees, utilities, etc that occurs during the Rehab period and up until the property is fully rented).

I did not see you include any closing or holding costs.  These can add up significantly.  If you did not include them then this may not even be a good Flip.

Back to CCR Calculation. I cannot derive a reasonable Cash Flow analysis using your data since you left out several key numbers. Once an Annual Pre-Tax Cash Flow is determined you can do your CCR calculation. CCR = Annual Pre-Tax Cash Flow / Actual Cash Invested x 100%. Using the 50% Rule for Cash Flow analysis your going to be negative.