I'm still a fairly new investor, and am not entirely confident in my use of the calculator. I have a SFH in Columbus, OH under contract for $87k, and the seller is willing to go down a little more to $85k. Rehab costs are estimated by my more-experienced partner to be $35k, but he doesn't like this deal. For his criteria, there may not be enough meat on the bones, but from what I'm seeing, it doesn't look so bad as I'm in the early days of my investing. Does anyone see anything I blatantly put in wrong that could make this a bad deal disguised by my own inexperience?
Also, it's listed as a 3/1 with 1100 sq ft, but actually has a fourth bedroom that just needs a closet, so the ARV could be a bit higher based on comps I'm seeing in the neighborhood.
*This link comes directly from our calculators, based on information input by the member who posted.
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
Every decision you make, to committing funds, impacts every opportunity you have after that decision. Don't accept base hits. It will take you three to score a run. Home runs take one. Apply those numbers to properties, and it plays out like this:
How many properties do you want to do, or how many opportunities do you need to find, to get 2 runs.
How many runs do you need? Whatever the answer is, divide by 2 and that will give you an idea of how many properties you need to do based on the quality of the "hit".
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
The quality of any deal is based on the criteria of the investors involved. If your partner says it isn't a good deal "based on his criteria" then it isn't. It may be for someone else though.
All squares are rectangles, but not all rectangles are squares.
@Joe Villeneuve, true. I'm doing this deal without him as an investor, so I'm using a lower bar than if we were going in together. As someone who only has one other investment property, I'm trying to get base runs, not swing for the fences. I just don't want to strike out.
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
Every decision you make, to committing funds, impacts every opportunity you have after that decision. Don't accept base hits. It will take you three to score a run. Home runs take one. Apply those numbers to properties, and it plays out like this:
How many properties do you want to do, or how many opportunities do you need to find, to get 2 runs.
How many runs do you need? Whatever the answer is, divide by 2 and that will give you an idea of how many properties you need to do based on the quality of the "hit".
Thanks, @Joe Villeneuve. All very valid, and I certainly am focused on scaling via smart deals.
With all that said, I'm also just trying to get the hang of analyzing using the calculator, as some of the numbers I use for the various values are ones I've gotten from other people, so I don't know whether I'm off track on the basic math.
Thanks, @Joe Villeneuve. All very valid, and I certainly am focused on scaling via smart deals.
With all that said, I'm also just trying to get the hang of analyzing using the calculator, as some of the numbers I use for the various values are ones I've gotten from other people, so I don't know whether I'm off track on the basic math.
I'm still a fairly new investor, and am not entirely confident in my use of the calculator. I have a SFH in Columbus, OH under contract for $87k, and the seller is willing to go down a little more to $85k. Rehab costs are estimated by my more-experienced partner to be $35k, but he doesn't like this deal. For his criteria, there may not be enough meat on the bones, but from what I'm seeing, it doesn't look so bad as I'm in the early days of my investing. Does anyone see anything I blatantly put in wrong that could make this a bad deal disguised by my own inexperience?
Also, it's listed as a 3/1 with 1100 sq ft, but actually has a fourth bedroom that just needs a closet, so the ARV could be a bit higher based on comps I'm seeing in the neighborhood.
*This link comes directly from our calculators, based on information input by the member who posted.
What neighborhood of Columbus are you investing in?
I have one single family purchased with conventional financing and am looking to do my first BRRRR so I'm fairly new too. But here's what I see.
For my down and dirty quick BRRRR calculations, I take the time to estimate ARV. Then I take 70% of ARV which is the cash out refinance for a duplex. In your case it's 75%. I take that number and subtract the purchase price. The remainder is what is left for rehab and financing costs. If it goes right to zero, that's a good to great BRRRRR. With the leads I'm seeing, it looks like I'll be leaving some money in my first BRRRR. So I have to balance the money left in the deal with what it would take to acquire a similar property that was already rehabbed. In other words, what it would take to buy a property with that ARV.
In your case, assuming the ARV of $145K is accurate, your 75% is the $108,750 you have toward the bottom. You subtract your $85K purchase price, you'd need rehab and financing to be $23,750 for a good to great BRRRR. Obviously that's probably not realistic, so the question is comparing the money you're leaving in the deal to what it would take to buy a rehabbed property with your projected ARV for this one. $145K times 0.25 + $5,000 in closing is $41,250. So, going to the trouble of rehabbing a property, you would leave over half of what it would cost to just buy a similar property with conventional financing. I don't know much yet, but I think I'd pass on that opportunity.