Brooklyn Brownstone BRRR Analysis Help

[Ahmed Saad]

Hi BP friends and colleagues. I could use some outside assistance in looking at this opportunity. Please note that this is in Brooklyn, NY which is crazy expensive and I'm certain would not be as an appealing deal were it in a Midwestern or Southern market. Here are the details and my assumptions:

The property is a 4 family brownstone that is in need of a total renovation. The building has 2 - 2 bedroom apartments and 2 - 1 bedroom apartments.

My renovation plan includes converting the existing 2 bedroom units which are large into 3 bedroom units, and installing new heat & water systems to allow the tenants to cover their own utilities and help reduce my operating expenses.

The asking price is $1.5m. It must be an all cash deal. The property will be delivered vacant.The estimated rehab costs are between 325K and 375K. Obviously I want to try to negotiate the price down, but these days everything is flying very quickly in Brooklyn; particularly in this neighborhood.

The estimated Gross Annual Income of the property after repair is $120K with a Net Operating Income (NOI) of $105K.

Ideally, after the property is rented out I would refinance. By my calculations, the most I could pull out with a DSCR of 1.2 would be approximately $1.1m.

I also think that based on the $105K NOI I would have a property worth approximately $1.9m-$2.1M based on a 4.5%-5.5% cap rate.

I'm not particularly good at running IRR calcs but if someone experienced could discuss with me, I would greatly appreciate it.

I don't think this is a homerun, but I think it's a solid double. What are your thoughts? What am I missing? Should I jump on this? I'm sure it'll go soon. I especially would like to hear from anyone with experience in expensive and/or really hot markets like Brooklyn.

Thanks,

Ahmed