How do the rehab costs for BRRRRs compare with Flips?

[Joel Hutchinson]

For those of you who do both BRRRRs and Flips, do you rehab them in the same way? If not, what is the difference in the way you rehab BRRRRs?

[Zach Westerfield]

For the most part yes, but there are small differences. For starters, I underwrite all my flips as a BRRR as well as a back up plan. Sometimes when I start a project I don't know for sure whether it will wind up as a flip or BRRR when I'm done. For both methods, comps drive my level of rehab. In both situations, the goal is to get maximum value for a property with the lowest amount of input. This doesn't mean being cheap or cutting corners. If you cover up a problem with a flip, the inspector may find it, and you will have to repair it anyway, as well as you have lost credibility. If you cover up problems with a BRRR, eventually they come to light and you have to repair them anyway. My philosophy is spend the money and do it right the first time.

There may be subtle differences for a property I know will be a BRRR vs a flip. For example, I do certain things to "tenant proof" my rentals. I mount bathroom hardware to boards not just sheetrock, for example. I also never put carpet in rentals, but I will in a flip depending on the property.

Overall, my goal is to not flip a property that couldn't be a successfull BRRR.