First BRRR Advice Needed

[Nicole Skorka]

I found a duplex listed at $95k in South Dakota that needs quite a bit of work. New roof, siding, balcony, both kitchens and both bathrooms. It's currently 4/1 top, 1/1 bottom. The bottom unit can be converted to a 2 bedroom. When the rehab is complete I will be able to get $1650/mo gross and $180k ARV.

Given the amount of work needed, I am going to offer $65k, 20% down, $1k earnest money. Property taxes are $1880, and I'm waiting on the insurance quote. The acquistion mortgage rate quoted is 5%/30 year, and doesn't include rehab costs. I can put in $50k max out of pocket for rehab.

Once the offer is submitted and hopefully accepted, the inspection and appraisal will be completed. At the same time I'll get bids for the roof, exterior, and interior. The units are both occupied for the next 6 months so I won't be able to touch the interior until the leases are up. This will prevent me for refinancing later than I'd like.

I'm worried that I'm going to get myself stuck and not able to cash out and work on the next deal. If I just do the roof and maybe exterior, I won't have the equity I'm hoping for but will still have tenants.

Thoughts, experience to share?

[Patrick Britton]

be extremely careful with statements claiming certainties, "When the rehab is complete I will be able to get $1650/mo gross and $180k ARV." 

Since this is your first you might want to have a few realtors give you CMAs. if there's a large range in value pay for a private appraisal in hypothetical condition (repaired). I see investors get killed every single day because their ARV was totally off. And even if your ARV is correct, there's always the risk and appraiser sees things differently.

This business has much that is outside of your control...too much frankly...