Rehab expenses on a BRRRR so high you can’t get right appraisal

[Mike Schorah]

How unlikely is it to have rehab expenses on a BRRRR so high that you can't get the appraisal needed?

I always hear about people who are BRRRRing complain about low appraisals. I never hear about people complaining about rehab costs being too high. Does this mean that a high appraisal solves everything if a rehab somehow gets out of control?

[Scott E.]

It is very likely that your rehab expenses will go higher than expected. Labor and material costs are very challenging to estimate, especially on projects that take several months.

The BRRRR strategy in my opinion is not a practical or realistic strategy in this market as you are going to pay at or over retail on the buy, and you'll put more into the remodel than you expect.

This will usually leave you in a positive equity position when you're done, but not a low enough LTV for a cash out refinance.