[Calc Review] Help me analyze this deal

[Kevin Scott]

If anyone can help me out with this one I would appreciate it. This is a 99,000 duplex; 1 bed/ 1 bath upstairs and 1 bed/ 1 bath downstairs. There was water damage from a pipe burst and some of the drywall and flooring has been removed by what the seller is calling a "professional company paid for by the insurance company". I wouldn't pay 99K as the house was assessed in 2017 for 73K but now needs would I estimate at roughly 20K worth of repairs. But, no matter how low I put the purchase price of the house in this report I still end up upside down with expenses. Rents around this area for a remodeled place would be around $700/ month. I couldn't buy the house for 20K but even at the purchase price worked into the BRRRR spreadsheet I still wouldn't make $100/door. Any help would be appreciated, I have a feeling I'm doing something wrong in the refi area.

thanks, Kevin

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*This link comes directly from our calculators, based on information input by the member who posted.

[John Leavelle]

@Kevin Scott

Ok, using a HELOC for Down payment and Rehab costs is fine. However, you didn't say how your financing the remaining Purchase price.

Dropping the Purchase price down to $20K is not a reasonable price. You have to justify why you are not meeting the asking price. Use the formula I showed above. You will be able to payoff any existing loan (Conventional, HML, HELOC) and recover all or most of your cash invested.

Evaluating a BRRRR deal is a 2 step process. First can you purchase and Rehab the property then Refinance to payoff any acquisition loans and get all or most of your cash back. Secondly, will the property provide sufficient cash flow that meets your criteria. If either answer is no then it's not a good BRRRR deal.

If your Rental Income is approximately 1% of the ARV, then, the Refinance loan is not the problem. High taxes and paying for utilities is the problem. In your deal if you can payoff all loans and get your cash out with less than 75% of the ARV, then, do it. It will lower the loan amount and reduce the Mortgage payment. Thereby, increasing your Cash Flow.

This strategy may not work in every market.  Just as every investment strategy does not work in every market.  My market expense ratio might be completely different from yours.  Just as individual property expenses vary from one to another.

Try to connect with other investors in your area. Attend local REI club or meet-up group meetings. They will be able to help get you where you want to be.