FHA financed BRRR method help!

[Drew Davenport]

I've found a SFR property that is listed at 108,000. Very sought after area currently. I know that when I remodel a few things and do some updates I can rent it for 1250. I'm using an FHA loan to finance this and will be an owner occupy at first. Total cost with mortgage, PMI, and taxes of 830 a month. I'm hoping to get in there quick and flip it (DIY), then refi as soon as possible. Planning on doing most of the rehab myself. Planning out every step of the rehab and buying all my supplies in bulk all at once for (hopefully) a solid discount. There are several houses on the street going for high 120s and low 130s with being updated that are very similar. I offered 100k seller pays closing right off the bat. They countered at 112k seller pays closing and will buy the home warranty plan for 600. I saw it appraised at 108 this year on our county assessors web page. I'm kind of in an analysis paralysis. This is my first dive into real estate. My goal is to use the BRRR method. I've made a few offers here and there. I think that the rental numbers look great. Just not sure if the rehab refinance numbers are that great. I'm at the point of saying hell let's do it and see what happens.

[Brian Larson]

glad you are getting started but to be honest, this won't work for BRRR (as you have it laid out). hear me out on why. 1. you don't have the spread needed in order to get your money back. assuming $130k appraised value and you can refi with 80% ltv, well that is $104k ALL IN. you are purchasing over that without rehab and holding costs included 2. brrrr doesn't generally work if you start off with the property financed conventionally in step 1. reason being that they will consider it a cash out redo (your purchase was locked in day 1 with purchase) these numbers don't fit the model (not a big enough discount on price to include rehab under 80% ltv) so I would pass on it. also, I would consider finding HML or private money so you can get the purchase and rehab toed up under ltv limits and then redo. sorry to be a downer