My first BRRR...or Flip?

[Patrick Bavaro]

Hello BP! 

I am a new out of state investor living in SoFlo and looking to purchase a property in Montgomery, AL. I was connected to my deal finder by another OOS investor here on BP. Anyways, I was sent a deal last night that at first glance looks promising, but after running the numbers I'm a bit torn. The property itself looks like a great candidate for everything involved with BRRR, with the exception of the cash flow. But maybe I'm too conservative?

This property is being purchased/evaluated through HML with 10% down, 10% interest, 2 points, and $1000 "fee". Rehab timeline is 3 months. Refi after 6 months.

Here are the numbers: 

Purchase Price- $44,000

Closing Costs- $8,500 (includes deal fee from the finder)

Taxes: $550/yr

Rehab: $55,000 (this is a full rehab, everything new) 

Market Rent: $1,050/mo (Median on Rentometer for the address. Deal Finder believes $1,200/mo is attainable... I ran it with $1,050)

Insurance: Estimated $100/mo (probably too high) 

Vacancy: 8%

Repairs/Maintenance: 8%

CapEx: 8% (Even though everything is new, 10 years+ down the line these will start becoming a factor. Should I be less conservative?)

PM: 8%

ARV: $140k

After running the numbers with a 4.5% conventional refi (probably need to rethink that closer to 5%, right?), it looks like I would be at $40/mo cash flow after all expenses are factored in. Realistically, the maintenance, repairs, and CapEx would likely be relatively low for the next few years.

Am I being too conservative with this analysis? See attached analysis.