Potential Brrr Opportunity - Need Analysis Help

[Theo Georgelos]

Hello BP Community. I'm may put it an offer into a SFH that needs work. Looking at the sales price and comps in the area, this might be an opportunity to Brrr it, yet I'm struggling to figure out the calculator to understand if it's the right deal. Here are some of the numbers and hoping all your experts out there can give this newbie some advice.

Property: Single Family Residence

Location: Aurora, Colorado

Neighborhood: Mission Viejo

Specs: 3 bed / 2 bath, 1,260 fin area, new appliances

Asking Price: $435,000

Rehab Cost: $35,000 (estimated)

Specs after Rehab: 3 bed / 3 bath, 2,002 fin area

Hopefully this gives y'all enough to work with.  I'm pre-approved at 3.75% and plan to put 20% down on a 30 yr conventional loan.  This will be my first deal and I already have contractors lined up if it all goes through.  I've tried the Brrr calculator, but there are some things on there I don't understand.  Thanks!

[Andy Sabisch]

So a few things that need some clarification. When you say it needs work, is it livable as it currently sits or is there work needed to get to that point? The reason is that if the loan appraisal sees it is not livable, you may not get the funding. If you are going with a conventional lender, make sure you are clear on that aspect. There are HML's that focus on this type of loan of you need to make it livable so make sure you are not into the loan funding phase and find yourself with no funding and trying to find it.

As far as using the BRRRR calculator, what you also need is the ARV (after repair value) for the property. You are taking it from a 3/2 1260 ft2 to a 3/3 2,000 ft2 unit which means the comps are going to be significantly different. On a st2 basis, you are paying $345/ft2 . . . what is a 3/3 with the larger footprint going for in your area? Simply scaling the value up based on ft2 will not work unless the other properties in the immediate area are larger as well since using $345/ft2 would work out to be $690K value. Make sure you get the current comp (since that is what the loan will use) and be sure what the ARV value will be as that was missing from your post.

If you are adding almost 800 ft2 of finished space plus rehabbing the existing unit, $35,000 seems light. We are wrapping up a flip and without going crazy on finishes, the cost was more than we had initially estimated simply due to the prices changing every time you go to buy something anymore.

If you share what your rehab numbers look like and what the pre and post rehab comps are, the BP family can give you a backup review to make sure you have not overlooked something or if there are more questions you need to ask the seller or your contractors.