Long Distance BRRR Strategy in Chattanooga, TN

[Steven Hasslinger]

Hello BP!

I am seeking an initial BRRR investment in Chattanooga and want to build the team to get started. Feedback is welcomed:)

My criteria:

• Safe neighborhood, good schools.  Comfortable walking after dark. (C+/B- or >)
• Total investment (purchase and repairs) max of 75% of property's ARV or put simply 25% equity upon rehab ending.
• 1% rule upon renting (e.g. all in purchase cost 100K then rent=$1000/month).
• $250 cash flow per door/month upon refinance

My Budget:

• $55K cash
• $22K home equity line of credit (on another rental).  Applying for increase to $45K.
• Lines of credit at HD or Lowes for materials.

Strategies:

1)   Cash Purchase 

Example: Purchase 75K and finance 30K rehab with Lowes, ongoing savings of 4K per month and credit lines/cards =$3K holding costs

All in $108K. 6 month rehab and 6 months rental seasoning. ARV $145K allowing $100K cashout at 70% LTV.

Leave $8K in the deal, rent at $1350 allowing me to cashflow $300 after refinance with ~$45K equity.

2) Hardmoney purchase and rehab allowing for a better product in a better neighborhood. Assume 2.5 points, 12% interest, 25% down as this is my initial BRRR and hardmoney loan.

Example: 150K purchase + $30K rehab=$180K.  Loan of $135K (75%).  Put in $45K cash + $12K holding costs ($1800 x6 mos while rehabbing and $150x6 months while rented) =$57K all in.

ARV $250K allowing $175K cashout at 70% LTV. Rent at $1700 monthly allowing me to cashflow $300 per month after refi. Leave $17K in the deal with ~$75K equity.

Goal: Repeat it every 9-12 months over the next 5 years.

How realistic are my thoughts on this? I look forward to establishing a team and learning from your feedback.  Thanks!