Low money BRRRR - Too good to be true?

[Dalton Eschberger]

Good afternoon! So I'm relatively new to the real estate market and learning about the different strategies that I could deploy. One that has peaked my interest is BRRRR due to being able to get into real estate with a lower capital requirement (sometimes none?)

So this post is mainly to get some feedback/experience in this area. So I’m gonna lay down a “Deal”(hypothetical) and it would be great to see if I have it correct!

So in my local area the average rent is between 500-1500 dollars a month depending on area. In this case I’ve found most of the 50-65k property value areas renting between 800-1000 dollars a month.

So looking at a home with a expected ARV of 60k and expected rent of 900.

So purchase price of: 32k

Reno: 8-10k

So all into the property at 40-42k

So inspect house - worth 60k

Do a 75% refinance to pull out 45k leaving 15k in the property.

So if you were doing this with little money. Take out private lender loan of 75% ARV of 45k at 10% interest pay for all of the Reno/costs maybe have some payments over that you cover. Then rent the house out. Take out a 4% interest loan of 75% and pay back the private lender. Then you own a house, for the price of the interest/closing/vacancy?

It just sounds too good to be true to me. I read success stories all the time on here. Just to me this sounds so good!

Haven’t factored in other costs because I don’t quite know exactly the industry average percentages for those yet.

Thanks,

Dalton