First BRRR Deal HELP Please

[Michael Mullins]

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First off, thank you for the help. This is my first BRRRR so I'm sure I'm missing something. My friend is my hard money lender. So he just wants to lend me 139k and after I refi the house in 6 months I'll pay him back $139k + $6,950 for the % payment. So can't beat that deal. I'll pay for both closing cost, a rehab out of my own pocket. I'm hoping that after the refi I'll pull both closing cost, rehab, and his money out. How does everything look, what am I missing?

[Caleb Heimsoth]

@Michael Mullins well from your post and report, I would say you're not missing much. I am just a little leery of a couple things, mainly ARV and rehab cost. What exactly is included in the 7k rehab? Typically at that amount it is going to be very small stuff like paint, carpet etc. Are all the structural parts of the house in good condition?

Second have you ran ARV numbers, with actual comps? In today's market it will be hard to buy at that price, add 7k in rehab and get that ARV. Typically its more like a full gut rehab to get those kind of numbers which depending on the size of the house is usually 20-30k. so typically it would be buy for 139k, pay 3k in closing costs, then dump say 30k into a full rehab (making most things brand new), and then it appraises at 230k, you refinance 75 percent of that. which is 172k, which (139k, plus 3k in first closing cost plus 3k in refinance costs, plus 6950 in interest plus 139k in principle, plus 30k in rehab leaves 10k in the deal. If your rehab numbers are accurate you would actually get money back.

The last thing I would point out is make sure with the refinance it would cash flow and make sure you get accurate quotes for PM, insurance and taxes.