First Deal (BRRRR) - Duplex

[Chris V.]

Hey BP fam,

Brand spankin new to the forums. We're looking at a duplex that would seem to be a candidate for BRRRR. It needs work, and is not appropriate (not enough beds) for us to live in (house hack) ourselves with 2 small kids.

I'm trying to analyze this property, but I just don't think I have the right information to complete the analysis. Where can I begin to fill in the details, and if you have any advice, I'd love to hear it. I'm using the BP (BRRRR) calculator, and here are the details:

Neighborhood: The houses (older and smaller) in the area are between $90 - $140K, ranging from $75/sqft to $90/sqft. The yards all look well kept (nothing fancy, just clean and establishd).

--- PURCHASE INFO ---

Price: $25K (this is what's listed, but I assume I would adjust this based on rehab work needed)

Basic Details: 1184 sqft, 0.37 acres, carpet/tile flooring, vinyl siding, concrete slab, public water, needs work inside (unsure of how much at this point, just looks like it wasn't taken great care of)

Units: Two units...1bed/1bath

Year Built: 1953

Sale History: 1991 ($43K), 2005 ($50K), 2017 (foreclosure, surprising)

ARV: Unsure (zillow shows $89K, but what do they know?)

Purchase Closing Cost: Unsure

Estimated Repair Cost: Unsure (should I get a contractor in to look at it and estimate?)

Refinance After How Many Months: Unsure (I assume this would be based on the rehab time?)

Estimated Rehab Time in Months: Unsure (no experience here)

--- RENTAL INFO ---

INCOME

Rent: Estimating (need to ask) $545 per unit, so total $1090

FIXED LANDLORD-PAID EXPENSES

Monthly Insurance: Unsure (no experience here, but I know my own home's insurance...if I use basic math to convert the sqft'age, it'd be $310 a year, something tells me this is not the best way to calculate)

Property Taxes: $1808 (as of 2015)

Water & Sewer: Unsure (I know what MY water usage is...unsure of what the tenants would use)

Electricity: Unsure (same as above, how do you guys estimate?)

VARIABLE LANDLORD-PAID EXPENSES

Vacancy: 5% (I've read to use this %)

Repairs and Maint.: 5% (I've read to use this %)

Capital Expenditures: Unsure (I'm not even sure what this field is for)

Property Mgmt: 10%

FUTURE ASSUMPTIONS

Annual Income Growth: 2% - saw Brandon Turner use these numbers in a webinar, unsure here.

Annual PV Growth: 2%

Annual Expenses Growth: 2%

Sales Expenses: 10%

Any advice or guidance is much appreciated. We really are brand new to this, but I am not letting my ignorance stop me, even though I'm hearing my conservative side saying, "you don't know this stuff, this is too hard."

-Chris

[Natalie Kolodij]

I would say step one would be getting definite numbers for your ARV and your repair costs to get it to rentable condition.

Compare other duplexxes that have sold in the area in the last 12 months to get an idea on ARV. A good real estate agent could help you with this as well.

You will also need to pin down the costs to renovate the property to get it to that ARV mark. These two factors combined with the cash flows are what will determine if this will work as a BRRR. You can pin down those numbers then utilize the BRRR calculator on BP to solidify if this is a good deal/ and or what you'd have to pay to make it one.