New to BRRRR. Can I add value w just exterior renovations?

[Kevin Santos]

I am looking to buy my first rental property and BRRRR in Cleveland. A lot of the deals I liked seem to already have been newly renovated and fully occupied. This does seem nice bc I am new and these would be relatively easier for me - since there isn't a lot of work involved. But I am not sure how much value I can add. I have $50-60,000 in cash I would like to use towards acquiring rental properties, and I would like to be able to refi / pull out my principle / "repeat." I have a goal of making $3,000 / mo or having 10 doors, and "repeat" feels like a pretty key part in reaching that goal with my starting capital (haha)

I was thinking that maybe I can just add value to the property but touching up the outside / exterior - landscaping (cutting down trees, planting new plants, etc), exterior paint, repaving the driveway, etc. But I was wondering:

Would I be able to add 25-35% in value to the property just by renovating the exterior alone? I am using 25-35% since that is what I would need to get to "75% of ARV."

Please let me know if this is possible. If so, I may end up pulling the trigger on my first property sooner rather than later ;) 

Any insight will help! Thanks BP! 

[Bob Okenwa]

@Kevin Santos

It is unlikely that simply painting the outside and putting some plants in will increase a property's value at the rate you hope it will increase. If the interior is still outdated or in need of fixing up, then what you do to the outside won't have much effect on the price of the home. 

You may generate more views and showings if your property shows well in the listing photos, but people still want to see updated/new kitchens and bathrooms and fresh paint on the interior. The market is showing signs of slowing down a tad in a lot of markets, so make sure you do your homework on what value adds will truly increase the value of a property in the neighborhood you're looking to invest in.

[Kevin Santos]

Thanks @Bob Okenwa I appreciate the insight. I guess I will have to look else where.. 

[Steven Foster Wilson]

Quote from @Kevin Santos:

I am looking to buy my first rental property and BRRRR in Cleveland. A lot of the deals I liked seem to already have been newly renovated and fully occupied. This does seem nice bc I am new and these would be relatively easier for me - since there isn't a lot of work involved. But I am not sure how much value I can add. I have $50-60,000 in cash I would like to use towards acquiring rental properties, and I would like to be able to refi / pull out my principle / "repeat." I have a goal of making $3,000 / mo or having 10 doors, and "repeat" feels like a pretty key part in reaching that goal with my starting capital (haha)

I was thinking that maybe I can just add value to the property but touching up the outside / exterior - landscaping (cutting down trees, planting new plants, etc), exterior paint, repaving the driveway, etc. But I was wondering:

Would I be able to add 25-35% in value to the property just by renovating the exterior alone? I am using 25-35% since that is what I would need to get to "75% of ARV."

Please let me know if this is possible. If so, I may end up pulling the trigger on my first property sooner rather than later ;) 

Any insight will help! Thanks BP! 

 No, I do not believe you can. Value is added from adding square footage, bathrooms, bedrooms, and kitchen. When I was starting out I called different appraisers to ask general questions like this. I just wanted to know what they were looking for and what made a property appraise for more. I think that we can easily get caught up on the pretty things but a lot of times it’s about the square footage. In my first property I was able to raise the ceiling and add 600 Square footage. This increased my value. Maybe another idea is to expand your search into Columbus and Cincinnati? Maybe that can help you get a deal faster. 

[David Leggett]

This is a great question! You're definitely on the right track and looking in the right markets. Cleveland has some great BRRRR deals. It might be hard to get a lot of value back from only exterior repairs, but I know investors getting brand new roofs on their properties with just a deductible, if they have home owners insurance, and have some previous damage to the roof. That will add some value to your property pretty fast! Also, some of my clients have found properties with some decent Point of Sale violations and get those cleared and do some minor improvements and put the property on the market a year or two later and have been able to make a profit with the way the market has been going. But you're definitely on the right track because it's all about efficiency and squeezing the most out of the lemon as possible so I love the idea!

[Andrew Syrios]

Exterior renovations alone are almost certainly not going to increase the value by 25-35%. And usually the interior mirrors the exterior so if the exterior is really bad and needs work, the interior desperately does too,

[Shane Kelly]

I will agree with the masses and say that if you could find property that only needed exterior work and could get 25-35% value add, it would've been done already and everyone would be doing it. I can say though, in my area on the West-side, I've seen houses that were outdated be fixed up and brought to quite a premium. If you can find micro-markets in Cleveland that can sustain it, it is still possible to take a property and breathe new life into it and make a pretty penny. 

[James Wise]

Quote from @Kevin Santos:

I am looking to buy my first rental property and BRRRR in Cleveland. A lot of the deals I liked seem to already have been newly renovated and fully occupied. This does seem nice bc I am new and these would be relatively easier for me - since there isn't a lot of work involved. But I am not sure how much value I can add. I have $50-60,000 in cash I would like to use towards acquiring rental properties, and I would like to be able to refi / pull out my principle / "repeat." I have a goal of making $3,000 / mo or having 10 doors, and "repeat" feels like a pretty key part in reaching that goal with my starting capital (haha)

I was thinking that maybe I can just add value to the property but touching up the outside / exterior - landscaping (cutting down trees, planting new plants, etc), exterior paint, repaving the driveway, etc. But I was wondering:

Would I be able to add 25-35% in value to the property just by renovating the exterior alone? I am using 25-35% since that is what I would need to get to "75% of ARV."

Please let me know if this is possible. If so, I may end up pulling the trigger on my first property sooner rather than later ;) 

Any insight will help! Thanks BP! 

 No, this isn't going to add any real measurable value.

[Nick Ferguson]

I have to agree with all the other posts. Exterior improvements aren't going to raise value much at all, let alone 25%. Honestly, with 60,000 in cash, you'll be very hard pressed to BRRRR in Cleveland. In 2017, this was possible. In 2022, it's gonna cost like 80K minimum to do anything meaningful in a neighborhood where you'll actually have sustainable, rent-paying tenants. And with you not being local, 80k will be difficult to stay under.

I've BRRRR'd my last two properties (2021 and 2022). The first, was about 70k purchase, about 5-10k light rehab and appraised at 120. Note, I pulled 80 out, thus getting my cash back but I didn't "profit" from it. The second, I'm just finishing up and haven't done the re-fi yet but it's all done and has paying tenants. I purchased it for about 75, spent about 20k (converted a dining room into a bedroom + minor rehab elsewhere) and I'm hoping to appraise for about 135k. I MAY be able to "pay myself" a little profit on this one but I'm likely to pull out around 95 and "break even" again. I did not do ANYTHING outside on either property that wasn't a necessary repair (removed a dead tree, removed signs from old PM, fixed gutters, etc.). The value improvement is all on the inside.

With 60k, you're going to be looking at a purchase price of no more than 40k.  While that's theoretically possible in Cleveland, you're going to want to avoid those areas/properties. 

If I were you, I'd either keep saving until I had 80/85K OR I'd put 25% down on a ready-to-go property that cash flows and get my feet wet as a landlord. Plenty of those exist - My 75K property that I'm BRRRRing would have been "ready-to-go" if I wanted to not add the bedroom and spruce the place up to get top-dollar rent.  With 60k, you can probably buy a second property with 25% down pretty soon after buying the first.