BRRRR in Montana from out of state

[Justin C.]

Hi all - New RE investor looking to get started in BRRRR. Considering investing in Montana from out of state. I would love to connect with anyone who has succeeded with BRRRR in the area.

I was looking in Bozeman recently as I have some contacts there & spend time there sometimes. But the market seems extremely hot - difficult to find a good deal, and mostly cash flow breakeven. Also there don't seem to be many opportunities to drive appreciation through renovation, because most of the town is fairly new and even places that need work are seeing a lot of competition /multiple offers. Curious if people think it's possible to succeed with BRRRR in Bozeman in today's market.

Of the geographies within a few hours of Bozeman, I am wondering if people would suggest looking at any in particular for best results in BRRRR. (Including Livingston, Billings, Helena, Missoula, Great Falls, or others).

I appreciate your thoughts or relevant contacts. I am also happy to discuss if there are ways I can add value to your process.  Thanks in advance.  

[Sarah Linkenhoker]

Hi Justin,

My husband and I just attempted our first BRRRR in the Bozeman area. We bought the property this summer with the plan to convert it to a duplex. We bought the property for $265k this summer and are currently in process of renovation. Our original plan was to convert the property to a duplex to maximize our cash flow, however we ran into issues on this approach with the appraisal. There just aren't enough comps for multi-family in the area to drive the appraisal price we needed to cover the remodel and pull our money out, it also pushed the loan price to a point it would barely cashflow. We decided to keep it a SFH and will sell it at the beginning of the summer.

I've been watching the market over this time and I think there are a few issues with BRRRRing here right now: 

1. It's really hard to get a good deal on anything. Maybe depending on your price range you could find something less competitive? We have friends trying to buy in the 350K range for the last 4 months (mostly Belgrade or west of town) with no luck and I think that competition is pretty steady all the way up to the 500-600k range in Bozeman proper. Like you noted, there aren't a lot of fixer-uppers and the ones that do exist are in really desirable parts of town so they sell anyways. 

2. Reno costs in the area are very high. We've found a lot of contractors who just throw out numbers to see if they will work. We got a quote for $10,000 to pressure wash and paint a large deck. We've been able to keep our current project in line by having relationships with the contractors, but you will still end up paying a plumber or electrician $100+ per hour if you don't know them. I know friends who have had a hard time finding contractors for small jobs, so just finding someone to do the work could also be an issue.

I'm not sure outside of Bozeman. We own three properties between Three Forks and Bozeman and are considering pulling the equity out and switching to a market where our equity will go further. I'm trying to look into some of these other semi-local markets as well so I'm curious if you find anything.