Mike,
Thanks for your response. I'm really just trying to learn how to analyze properties and determine whether this is a good candidate to BRRRR; one which would produce a positive cash flow.
When I saw this property it looked really promising on the surface. So I thought I'd run it through the BRRRR calculator. The property is available at auction and is showing a starting bid at $180,000. I put $200,000 in as the purchase price under the assumption we'd get lucky. Auction.com shows that it has an estimated resale value of $285,000. I used $280,000 as the ARV to be conservative. That's kind of how we arrived at $70,000 in equity. With respect to the rehab cost; I simply guessed and used a $5000 estimate, since I couldn't see the interior and it looks well maintained on the outside.
So assuming those number are correct I thought that we'd get a reasonable result. But after the refinance of 70% LTV, the mortgage is going to be too high and the rent ($1300.00) won't cover the payment. It seems that most of the time when I do a 70% LTV refinance the mortgage for a property is always too high and the rent never covers the payment; let alone adds cash flow. I had also thought that 3.5% interest would be reasonable. If that's considered low then these numbers really won't make sense.
I also wasn't sure what to put down for origination fees. I looked at a HUD-1 from a previous purchase a long time ago and pulled that number out. It seems that was the wrong place to look to get that value.
If you were to run the numbers on this property would you come to the same or worse result? Why did the deal look so good at first and then fall apart once I ran the numbers in the BRRRR calculator?
Thanks again for your comments. It's very appreciated.
