BRRR clarification question

[Stephanie Martinson]

Hello,

I'm looking to do my first BRRR deal, but I'm not quite sure it's technically a BRRR.

It's a gutted house- $100,000 and I would get a new construction loan, put $25,000 (of my Dad's money) down on the loan.   

Rehab it for $150,000.  

Refinance for a conventional loan and give my dad his $25,000 plus 6% interest= $26,500.  

The comps in the area are around $300,000, so after construction there would be around $48,500 in equity.  

I may have to sell it, or move in to it because I'm looking to quit my W2.  

Any thoughts? Is this considered a rehab property instead of a BRRR? You all are the BEST!

[Tim Herman]

@Stephanie Martinson Hopefully you haven't bought this yet. The only way your dad will get paid is if you sell it. The construction loan will roll over to a regular mortgage. $75000+$150000=$225000 new mortgage. You then do a cash out refi for 80% of ARV or $240000 so your dad will get $15000 less the cost of the new mortgage. If you sell after and don't refi. $300000x8%=$24000 selling cost. $276000-$225000-$26000=$25000 minus holding cost during renovation. Not much profit. to do a BRRR start at ARV and work backwards. $300000 x 70%= $210000-$150000 rehab= $60000 less carrying cost.