2/1 Deal Analysis (First time investor)

[Drew Purvis]

First time investor here looking for some input on a SFR buy and hold property. I am looking to use the BRRR strategy on this property. I am using private money to fund the deal and would repay once the refinance portion is in place.

2 Bed/1 Bath

Offered: $21,000 all cash, no inspection contingency

Closing Costs: $1,500

Taxes Current Year: $1,800

Needed rehabs(Estimated): 

- Fix grade issue $300

- Demo and remove patio $500

- Demo and remove moldy drywall in basement $150

- Repair basement cracks/seal/paint $500

- Dehumidifier $300

- Paint interior $300

- Paint Exterior $200

- Add/repair downspouts $500

- Replace boiler $3,000

- Replace siding on carport $400

- MISC Electrical $350

- MISC/Oversights $1,000

TOTAL Rehabs: $7,500

ALL IN TOTAL: $31,800

Comparables in the area are around 45k-48k on average. Some upwards of 56k. Market rent is conservatively $750/month but I would likely target a rent of $800/month. A craigslist search turns up many "renovated" 2/1 houses at $800-$825/month rent. After getting unit rented and refinanced, here are how the numbers should shake out:

Looks to be about $158 cash flow per month. However, as stated, I would target an $800/month rent and I would also manage the property myself so the numbers should look even better.

Thoughts?

[Drew Purvis]

Hey BP world. I wanted to provide a quick update on this property. I DID end up purchasing this home and completing the renovations. I was successful in using the BRRR strategy. All in all I spent about 41k on the property and renovations, property rented for $795/month, and I refinanced out everything I had into it.

After completing the BRRR strategy and feeling like a winner, it was time for the city inspection process. In Lansing, it must be done once every 3 years (for single family). Over the last 6 months we have undergone a series of inspections, code compliance, and re-inspections to the tune of about $3400...OUCH. It is finally over and the property is fully certified. This was one of those unexpected costs that sucked away all of the potential cashflow to date. I do not regret this purchase in the least. Several of my initial figures were off(I ended up with MORE cashflow than expected) which helped absorb the sting of the inspection process.

One final note, I used the money obtained from the Refinance to fund 2 additional properties, both of which are BRRR strategy as well. I now have 3 properties total, all that are cashflowing. If I would go back and change anything about the process, I would not have done the renovation by myself and would have hired most of it out. I ended up losing rent money by trying to save on labor costs. I could have turned the property quicker and refinanced out sooner. Lesson learned.

A picture just before we completed the remodel:

A couple of quick before/afters of the basement: