Current BRRRR Property Analysis. (Warning, not a short read) :)

[Travis W.]

Hello,

I made a post earlier regarding my current situation, but i figured i didn't include enough information and it wasn't very put together. SO, i come back to you BP to help me sort this out. I will continue to ask questions (no matter how repetitive..) until I can gain better clarity and make better moves. If you so courteously would like to help me analyze this, it's much appreciated!

So, information.

House location: Smaller sized town by a bigger city that recently developed a new highway, bringing our town into a much better location. The house is in a residential area, about 2 blocks from the towns down-town area. Quiet location, majority of neighbors are older and close to retirement if not retired. Average price of buildings around mine are a bit higher. About ~15-20% or so.

House: SFH 2 bedroom, 1.75 bath, with a detached 2 stall garage which is halfway finished (it needs interior walls, but has insulation). It is recently remodeled house including a new deck, tiling, carpet, and a mud-room addition. Most everything has been brought up to date on it minus the shingles. Former owners took out some walls downstairs and created a new bathroom, and the basement is considered finished albeit quite small. It has its own exit door and could be changed into a bedroom with the addition of a egress window.

So, that's to give some background of the property and its location. On to the financials.

Purchase Price: $127,000

Loan Terms: 30-year amortized VA home loan @ 3.750%

Down-payment: $0, $1000 in Earnest money, and I paid no closing costs.

Rent: $1300, $1400 could be potentially done.

Rehab: I am figuring $5000, honestly not too sure, house is in pretty good shape, but shingles may need to be redone.

Property Taxes: $1552 annually, (this is $0 as of this year i believe because of an exemption I get as long as i am living in the property and having a 70% rating from the VA)

Insurance: $1284 Annually, seems high, but I feel that is because of the coverage I need to have for it being a VA loan.

Mait/Repairs: I am figuring about $1200 annually.

Advertising/Administrative costs: $300 annually

Variable Cost PM: 12% of income.

Vacancy: 8.3%

So essentially.

Income: $14,300 annually with the vacancy included.

Expenses: $6052 annually

NOI: $8248 annually

Mortgage is $588, or $7,058 annually

Cashflow annually: $1,190 / $99-monthly (closer to 200 if rent was raised 100 dollars)

Cash ROI: 23.80%

Total ROI: 70.51%

Cashflow-to-Mortgage ratio: 117%

Some other important factors:

Loan remaining: $125,000

Personal W2 income: $3,338/month

Personal Expenses with house: $1750/month

Personal Expenses without house: ~$400

Strategy: BRRRR.

So as you can see, for a new investor, I don't quite know what to make of this situation. It is cash-flow (not great however.) But, it has the potential to become so (~760/mothly at the end of the loan, which if I just paid it down would take me 4-5 years roughly). People say if it's not cash flowing great it will always be bad. If I pay down the loan some, and refinance (per the strategy, will it not cashflow better?) A 100 dollars, per door is still okay per me as it opens up my saving potential significantly. I understand unknown expenses happen (capex) and I know they will eat up my cashflow, but that is a risk i think can be taken with a high W2 income. My second move was to find a multi-unit that cashflows much better and utilize a FHA loan or private money for it, now that I somewhat understand the financial side of things better.. so, based on reading this, does this seem like a bad investment?

Some key questions:

1. Would a good idea be to live in the property for now, while I have the property tax exemption and pay down the loan best I can, so come later this year or next, I can refinance to a better cashflow?

2. If not, do you recommend I fix-and-flip this, or just cut costs and just sell it?

3. Is there another option I am not seeing?

4. Is taking on a multifamily, as long as it cashflows great, a good next step? (I know I only have an FHA loan left to use unless I refi out of my VA loan to reuse it.)

So, If you made it this far, I applaud you. I had to include everything i could think of so people understand the whole picture as i see it and not just some simple numbers that people could misconstrue what is at play. Thank you from the deepest part of my heart and I look forward to any responses.

Travis