BRRRR Strategy help needed

[Tu Hoang]

Hi BP,

I am about to acquire my first project and needed to figure out my exit strategy. I am currently at Buy.

Purchase price: $120,000

Rehab: $95,000

ARV: $280,000

For the Rehab portion of BRRRR, I have received bids from GCs, but have a hard time understanding how the proposal work. The GC left out a some things we discussed, which I have requested to be put in scope before signing. Is getting everything in writing before the project start the best way to protect myself? Also, the budget is higher than i would like. What happens if we finish the project under budget? Does the GC keep the difference? What if it was over?

As for the Refinance portion of BRRRR, I have a hard time understanding how the refinance works. Since I am taking out a hard money loan, interest rates are expected to be 10.5% with a 1-year term. The rehab is expected to take 3 months from close to finish. If the seasoning period is 6-12 months, I would have additional carrying cost for 3-9 months. Are there lenders out there that would work with a lower seasoning period. If there are, can someone point me in the general direction?

[Josh Caldwell]

BIG RED FLAG on the GC.  His estimate is not complete, which means your numbers are not complete. You need to get the entire scope of work out of him, or his replacement BEFORE you even think about moving forward on this project.