BRRRR Deal - What's missing from these numbers

[Ley Nezifort]

Hello BPers and BRRRR lovers,

My partner and I got our first BRRRR deal under contract, it is a 6 unit near Fishtown Philadelphia. As we enter Due diligence, we wanted to figure out all the costs that incur from the different phases of the process (Buy, Rehab, Rent, Refinance). We put together an excel sheet (see picture below) with all the costs we can think of. But we wanted to get some additional eyes on it, especially from the ones who's successfully executed the BRRRR strategy.

What are some hidden cost you wished you knew prior to going in on the deal ? Or what would you change overall given this deal ?

For some more insights, we got a hard money lender who’s going to fund 90% Purchase & 100% Rehab. And we’re securing a Private loan to for the acquisitions, and to carry us through the rest of the project

[Ryan D.]

@Ley Nezifort I think you nailed every carrying cost/holding cost that most forget about during the acquisition and rehab part of your Pro-forma. Will you be doing 6 units by right? If not, I'd say your soft cost of $1,000 is far too low. Architectural drawings, L&I permit fees & a zoning attorney if a variance is needed for this type of build will be 15-20k on average. With or without variance you'll need to submit plans to L&I for permits so I'd put in 10k for architects & permitting fees on the low end. Rent & refi are lacking important details like interest rate, accurate property management fees, rents varying by unit size/build-out, etc. I'm surprised your lender doesn't want debt coverage ratio in your Pro-forma.

If I had to guess I'd say your ARV is too high considering you're probably in a fringe neighborhood. Is this up in the pocket near Huntingdon station? Or somewhere in near Norris square? Luckily for you is at 6 units you'll be able to sway an appraiser your way given the lack of comps and high rent roll. Either way looks like you have plenty of room to guide down to a more reasonable ARV unless you found a unicorn somewhere near Fishtown worth 1.35m once stabilized. Best of luck.