Insight about a possible BRRRR deal with hard money

[David Rosenbeck]

Good morning everyone, 

I have a property that I'm going to go look at that I believe may be a good BRRRR deal. The property is in Fort Wayne, IN and is close to one of the Universities here in town. I currently own one student rental and am looking to add another to my portfolio.

Property details: 

4 bed 2 bath

Built 1910

Nearly 2,000 sq ft on a large lot

Asking $27,000

Needs extensive rehab

Capital is running short after finishing up my last student rental and was thinking about diving into hard money. My thoughts are use hard money to both purchase the property cash and fund the renovation.

My estimated numbers:

Cash purchase price of $25,000

Renovation budget of $55,000

All in at roughly $85,000 with closing costs etc

Hard money loan at 10%

Total cost including hard money interest: $93,500

There are multiple comps in the neighborhood which were recently sold all north of $110,000 with majority 3 bedrooms/1 bath/ or less square footage (1,300-1,500 compared to the 2,000 sq ft of this home) so with being relatively conservative with my numbers a $120,000 appraisal and running this through the BRRRR calculator at a 75% LTV refinance, I am only leaving a few grand in the deal.

This would be my first time utilizing hard money for a deal so please poke any holes in the numbers that you can see. I'm hoping to walk the property today/tomorrow and if it doesn't appear to be a total wreck I will then bring my contractor through to see if the $55k would be adequate for the rehab.

Appreciate any input.

Thanks as always,

David

[Zach Westerfield]

Are there points for the hard money loan? What hold period are you estimating? given its a major rehab ill will assume 6 months. Also, I assumed 2 points for hard money. With these assumptions I'm showing just under $6,000 in holding costs (included utilities, taxes, insurance, interest). That puts me around $87K with closing costs. If you factor in closing costs for the refi (i used 4%) total capital requred comes out just below $92K, so your numbers seem pretty good. 

if you can refi out 75% of 120K, looks like a great deal!