To BRRRR or to Buy Rent Ready

[Alecia Loveless]

I've come across a property that is dirt cheap. My contractor and I looked at it today and its down to the studs but some large projects have to be done. It needs a new roof, and to be jacked up and have a new foundation put in which is common where I am. There are holes in a wall where a chimney was ripped out and no one replaced the wood. The yard has to be regraded but contractor  felt while the foundation was being done the excavator could do this too for a few more hours work. After we parted ways with the realtor my contractor gave me a couple of figures for things  and since I have been working with him frequently I know what his subcontractors charge an hour. He gave me an all in figure to turn the building into a virtually new 2 family. I expect to pay $100,000 more for a 3 family in a few weeks that one unit has to be rehabbed in. 

I went home and using the BP calculator ran my own estimation of what I thought the rehab would cost based on the other projects we've been working on and came up with the same figure he had. Some of this is dependent on the foundation estimate. 

After all was said and done it would be a grand slam on cash flow and then depending on how much it was refinanced for it would still be a nice cash flowing deal.

The realtor didn't think we'd see the massive appreciation that's been going on in the area due to it's location, its on a somewhat busy road, but he felt that with the area's lack of nice clean new apartments there would be no problem renting it or selling it to another investor in the future. 

To those who Have tackled such a project would you do it again? Or would you recommend waiting for something that just needs mostly cosmetics in the future?