Market shift what to do with my BRRR deal?

[Mohammad Khan]

Hi BP,

I went into escrow on a fixer in palm spring recently. My initially planned was to fix it and put it on short-term rental. But given the recent shift in the market I am back on due diligence table. The Palm spring market has started to show slow down and I see many sellers are reducing prices in the past week or so. 

I don't know if the property is still a good buy as I am not sure how to adjust the ARV and if putting the property on short-term rental (Airbnb and Virbo) after fixing it is still going to generate positive cash flow given the economy downturn coming up due to interest rate hike and as Fed planned to increase the interest rate couple more times down the road.

Some of the pros and the reason why I am having hard time letting go this deal: I was able to get this property at 5% down and at 3.87% on a 7 years arm. The property is price is 940k, the original ARV was 1.45M and the repair cost is 120k

Just a little bit about me. I am a long-term real estate investor I owned couple multi-family properties that positive cash flow. This Palm spring deal was going to my first BRRR and short-term rental deal, so that is making me nervous. I am very passionate about real estate and I found my passion in BRRR investing. I love analyzing deals and due-diligence and I definitely see myself a long-term BRRR investor.

Thank you in advance!

[Kevin Woodard]

How much money are you willing to leave in the deal? If valuation comes back lower than expected? 

Regarding STR in the area has there been any change in demand and will that affect your refinance on the back end, depending on the product?