Perfect BRRRR or Flip Opportunity?!?!

[Eric Martin]

Hello everyone, 

This property was brought to my attention as a possible first time BRRRR investment. I would love to get your thoughts on it! What would you offer? What would you expect in rehab costs? Or would you pass on this?

The home is located in Amherst Junction, WI. Amherst area is very nice and growing community. Would be framed as a 2 bedroom, 1 bathroom home. The home is 760 square feet. 

Currently this property belongs to an investor that I write insurance for. He knew that I am interested in real estate investing so he said to get estimates and stuff done and to make him an offer. Currently working on getting a few estimates in place and will update as I get them in.

[Marcus Auerbach]

That does not look good! I have been BRRRR-ing in Milwaukee for more than a decade and have had to deal with a few difficult properties. Regardless if you want to BRRRR or flip, in either case you need a heathy ARV (after rapair value). ARV is a function of neighborhood values (loaction), size (square footage) and condition. The issue with a tiny 2 BR house is always that you'll end up with a very low ARV. At the same time your rehab cost is almost the same, because small houses have just as many kitchens and bathrooms as bigger houses. You are also limited on rents for the same reason.

The second issue is that your list of "good" items is very short. Most investors make the mistake that they look at the things they need to fix, I always make a list of things that I don't have to fix: like good roof, good siding, good windows, good furnace, plumbing, water heater, driveway, garage, etc When your list of good items is very short, you are probably looking at a money pit.

What would I offer for this? Land value minus 10k for tear down minus profit.  And that is not going to happen - it will probably sell to someone who will live there and fix it up, while having very low expectations and completely underestimating the expenses they willlll face.