BRRR property with no inspection - Baltimore City
Hello BP members,
I recently got a potential BRRR property under contract however it is an REO "occupied" property and the bank is not allowing any inspections or appraisals. Based on a drive past, the property appears to be vacant- grass overgrown, no furniture in the house, clearly not maintained for several months. The property is located in a very good area of Baltimore City.
$65k purchase price
$45k rehab
$140k ARV
$1500 Rent/month
The numbers work but the lack of an inspection clause is worrisome. Has anyone purchased an REO without an inspection? Any advice?
Thank you,
Stephanie
Most Popular Reply
If you can't get an inspection, you have to assume that the interior needs a full gut rehab for the purpose of your rehab analysis, because you can't use an inspection to rule out that a particular infrastructure or mechanical item does not need to be replaced. If you don't, that is a very big risk that will have you end up with a property that you either a) don't have enough money to adequately rehab b) have to put in more rehab than the property is worth. These are excessive risks that newer investors should not face without inspections and proper estimates to ensure they are not buying a a liability. What if you go in and find out there are structural problems that requires property to be condemned (as an extreme example). Assume new plumbing for entire house, all new wiring, all new HVAC/water heater, new kitchen, new bathrooms, new roof, windows and the usual cosmetic. Yes, there could be less work required, but you have to plan with conservative estimates and in this case without any inspection whatsoever, that is a full gut rehab. Maybe 45k fits those based on the contractor you are working with, but just make sure to anticipate. The baltimore properties tend to be very old, so expect major systems to need replacement if you don't know interior condition.
Who gave you the 45k estimate out of curiosity?