BRRRR analysis in Massachusetts

[Ryan McGrath]

Hello BP community! I'm fairly new to investing and pursuing deals using the BRRRR method. I found what I think is a good deal and was hoping to get some feedback from the community.

It’s a single family home in MA located in zip code 02780. Nice area of town with comps averaging $145/SF.

House is legally a 5BR, 3.5 BA, however actually has 8BR. The existing owner lives in one bedroom and rents the remaining 7BR between $500-600 each, so total rental income for all 8BR would be $4,400.

This is a cash deal with a purchase price of 279k. The house was recently appraised at 359k so there’s $80k equity built into the deal.

Rehab costs are $15k which includes a new roof, new kitchen cabinets/countertops (one main kitchen, and one of the attic “apartments” kitchenette) and some touch up paint at the exterior. The rest of the house is mostly updated and really does not need any immediate work. Gas boiler is about 15 years old and has city sewer.

NOI: $42,274
ROI: 15% based on the 279K purchase price

Goal is refinance on an 80% LTV on a $400k valuation. Comps in the area are much higher with comparable homes selling around $450k with same square footage.

Based on a 80% LTV at 400k with a 30/yr loan @ 4%, I'd cash out with $26k and have a yearly cashflow of $23,504.

My concerns here are the fact that its not legally an 8BR, and also the fact that 8 tenants in 1 single-family home is a lot to manage and I’ll likely have higher than average vacancy, but I’m up for it as the numbers seem to really work. 4 of the existing tenants have been there for 3+ years.

Sorry for the book but wanted everyone to get the picture.

Feedback would be greatly appreciated!