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Updated over 4 years ago,
Options for a distressed property in a great location?
I'm just getting started in REI and have been loving meeting so many people and diving into all of the resources available on BiggerPockets. I have been looking for a house hack in my local market, but I also have a potential opportunity to help a family member who is living in a house that's falling apart.
Said family member bought a 2,000 sqft, 3bd/2ba, brick, row house 15 years ago in a great neighborhood in Richmond, VA that has appreciated a lot over time. They bought it with the intention of fixing it up, but the work has been more than they've been able to handle and the house has continued to fall apart over the years. They are still living there, despite me constantly telling them to move out, sell the house, and find somewhere more hospitable.
However, I've been mulling over the idea of helping them with a BRRR (I don't know if they'll want to repeat). It would need to be completely gutted and rehabbed, it could potentially be divided into two separate units, the Zestimate value is around $400k, and a nearby comp sold for over $500k last year.
I have a basic understanding of the BRRRR strategy but the details are still tough for me to grasp, so I'm wondering:
- About how much would it take to gut/rehab the house?
- If the ARV was $400k, how much can you pull out? 70-80% of that value?
- Assuming it appraised at $400k and they could pull out 75% ($300k), approximately how much would the new mortgage be? I guess this is the biggest question, as this defines whether or not this would be viable. The house (or larger unit if it were to be sub-divided) would need to rent for quite a bit above the new mortgage amount for this to work, right?
I know this is a long post and asks a lot, but any insight/advice would be greatly appreciated! I know this would be a big project to take on just getting started, but it seems like a great way for them to be able to keep the house, bring it back to life, and also turn it into an investment property. Thanks so much.