Help me analyze this BRRRR deal!

[Kimberly Kim]

Good Morning BP Fam!

This will be my first BRRRR property, but I was wanting to get some feedback. I met an agent randomly who is also an investor. He showed me a 2 BR 1 BA house in Beacon Hill, San Antonio. PP 196K, saying it needs ~50K rehab, ARV 375K (to me this is high but someone please vouch), average rent ~$1500-1600 per month. I would convert it to a 2 BR 2 BA. Would this be more of a BRRRR or if it doesn't rent out, maybe I could do a fix and flip? What are my possible exit strategies if it doesn't work out? (This is fear kicking in). Deal or no deal? What are your thoughts? Thank you! <3

[Jaron Walling]

@Kimberly Kim Sounds like an good start and kudos to you for questioning the ARV! Some agents (not all) will try to sell novice investors with numbers. It's an easy trap to get caught in. I'd be asking for a comparable market analysis before estimating the ARV. Narrow that search to properties sold in the last 4-6 months. Really have to dive into the neighborhood and look at the photos because now the details and price matter. Honestly anything in 2021/spring 2022 isn't comparable. It wasn't a balanced market. It was craziness.

I'd afford a flip deal right now. Flipping in this environment is tricky. Unless you have experience with distressed properties, remodeling, and working with contractors just avoid the strategy. It's easy to break even or loose money. I suppose if the remodel timeline penciled out into spring 2023 (better selling) you could try it. The Feds are in control and if rates stay high or increase the chances you sell for top $$$ drops. The numbers provided are pretty close for a rental but again it depends on your investment goals. Maybe it doesn't cash-flow (today) but in 2-3 years it does. Then the strategy becomes positive and you gain PM experience. 

Rant; some flipped properties are already getting caught and sitting for months on end but you won't hear about it. Nobody talks about loosing money. That's just my opinion.