1st BRRRR Rehab Dilemma

[Chad Pore]

Hello,

I have a dilemma I looking for some advice/thoughts on regarding a BRRRR property.

Background: Two-story 4/1.5 SFH purchased for $25,000 cash. The cash was pulled from some 0% credit cards (not as advances). Local bank has approved $20,000 construction loan for rehab, but is unwilling to do any more as they feel we do not have any skin in the game. We are expecting $7,500 - $10,000 in rehab on the interior (paint, flooring, cabinets, updated bathrooms). We knew at some point it might need a new roof and new siding, but e were originally not planning on doing much else as we should be able to rent it out for $700-$800.

After reading forums on BiggerPockets, listening to multiple BiggerPockets podcasts, and some discussion we (my brother and I) decided we should go ahead and do everything now. The roof is $7K, vinyl siding is $9K, and windows are 7K. We also need to replace HVAC for about $4K. This brings our total rehab to around $40K. We are expecting ARV to be $85K or higher based on comps in the area.

We are not sure we can fully fund the $40K in the next couple of months.  We know HVAC along with the interior stuff needs completed for sure.  My question is which two of the three (windows, roof, siding) would you replace first if you could not fund all three at once?

Roof: Is old, has three layers with bottom layer being wood.  Needs all layers ripped off, new decking put down, and then new shingles.  Also need roof vents as it currently has none.

Siding:  Currently has masonite siding which was painted sometime in the last couple of years, but you can see water damage throughout.  It is obvious the paint was not good at some point allowing the water damage to occur.

Windows:  Old single pane windows.  Most all of them on the main floor have been caulked shut and we are concerned it was due to air being able to get in/out fairly easily.  The windows that do open are obviously not connected to the weights anymore.

Let me know if you need more info and I appreciate any comments.

Chad

[Alejandro Galo]

Hello Chad,

I am no expert on the subject, however, arguing with an appraiser once though me the protocol some of the follow to determine real estate value.
My suggestion is for you to think like appraisers do and basically rehab the items that would increase the value of the house the most.  In my opinion that is the roof and windows, in that order.
While your future property manager (or yourself if you manage your properties) is vetting potential tenant, mentioning how the siding will be updated within 6 months or in a reasonable period of time would reassure the tenant that someone is taking care of the property and that you have a plan.  Use it as marketing.

The advantage is that the siding can be repaired without having to relocate the tenant.
The new roof allows for a lower insurance rate,

Wish you success in your project.