BRRRR - Duplex Conversion Deal Overview

[Mike Singh]

Hello everyone , 

I'm currently looking to do my first BRRRR and wanted to get some thoughts on the following deal. The strategy will be a traditional BRRRR by converting a single family home (detached bungalow) into legal duplex conversion in St. Catharines . For anyone outside of Ontario , this is an upcoming city with a lot of potential and is about 1 1/2 hours away from Toronto .

• Purchase Price : $415 000
• Downpayment: 20% - $83 000
• Estimated Mortgage Payment- $1276 per a month 

For the renovations , I'm looking to do the following : new floors , upgrade kitchen , replace all interior doors , new furnace , create legal 2 bedroom basement unit (add extra hydrometer , add kitchen), add laundry on both floors .  I'm averaging that this will cost around $100 000. 

1. ARV based on surrounding area : $620 000
2. Mortgage after refinance : $1906 per month 
3. Rent 3 bedroom unit : $1600 + hydro
4. Rent 2 bedroom unit : $1300 + hydro
5. 3% Vacancy : $87 per month 
6. Property Tax : $329 per month 
7. Insurance : $115 per month
8. Property Management 8% : $232 per month 
9. Utilities (Gas , Water) : $150 per month
10. Cashflow yearly : -$72 per month
11. Cash left in BRRRR : $35775
    
    This property won't meet the 70% rule or 1% rule and the cashflow would be negative . Would love to get some feedback on this deal and find out if my numbers/ calculations make any sense . 
12. Also if anyone knows any great contractors in that area , feel free to reach out :) 
    
    

[Heather Johnson]

This seems like a high-risk deal to me. Even though the area is up and coming if things slow down, you may find your self in a difficult situation. Negative cash flow and money left in the deal...not ideal. I just listened to a good segment yesterday that you might want to consider. It has good advice on how to be wise as a property owner. 

https://youtu.be/WwUK9kmIzi8