All Forum Posts by: Robert Walden

Jaysen and Chase, thanks for the added details and information! My gut is telling me this deal has potential. But, its good to get someone else's opinion before I pull the trigger. Still waiting to confirm a loan (hard money or personal). Everything else seems to be falling into place. I'm pretty sure my reno numbers and holding costs are correct, or at least doable out of my contingency on those where I had to guesstimate.

As for the ARV, the median price range in this area is considerably lower. However, there are several recent comps in the price range I expect; some without the amenities I'm planning, and none newly renovated. I'll definitely be near the top of the food chain though. So, I was planning to possibly add some "free" enticements (covered by the higher rent), such a WiFi (which I need to maintain my property security system), lawn care (which we discussed previously), and I'll pass through the water.

To answer your question, Jaysen, I chose Lease Purchases because they enable me to goose my potential profits while still commanding top sale price and rent for this house in this neighborhood. The house is in a decent neighborhood which sits on the edge of a questionable one. LPs seem to make sense for me by allowing me to attract higher sale price and rent from buyers who may not have all their down payment and/or credit to buy a home in a little nicer area. I take it you prefer to cash out immediately?!? Is that purely to turn your money over faster, or some other reason (like tenancy)?

I'll make the adjustments to the percentages and costs that you both advised and re-run the calculator. What numbers should I be looking for to confirm that this is still a good deal? (I assume no negatives, preferably a $100-200. positive cash flow, and 100% of my expenses covered by my increased equity. Yes?)

Thanks Jaysen for your detailed reply! One of my biggest questions about this BRRRR Analysis is that there's no explanation of what each of the itemized terms mean. I'm not familiar with them, and don't know whether they're a red flag or a good thing!?! Is there a legend or tutorial of some sort? (The BRRRR primer didn't cover an explanation of the report.)

[Hint: It would be nice if Bigger Pockets added explanatory paragraphs attached to each item so we could hover over them for an understanding of their significance, like the ones beside many of the questions on the forms used to create the report.]

I appreciate your comparison of many of my line items. That gives me an excellent reference for what many investors are doing going forward. And, I'm sure CT has much higher everything economically than here in the Rust Belt of Ohio. Toledo has one of the cheapest cost of living in the country for a city this size! As off as some of them may seem, I actually spent far too long (over a week) obtaining exact numbers for many of the items listed. Since this is my first flip (returning to investing after a 25 year hiatus), I wanted to make sure I'm not missing something important, or underestimating things. I also answered some of your concerns in the questionnaire forms; not sure whey they're not reflected in the report!?! I'll respond to each of your comments inline, below:

• Q:  Specify what kind of property this is.

• A: This is a SFH (SFR). (I indicated that in the drop-down choices for property type. Not sure why it doesn't appear!?!)
• Q:  Closing costs look very low. U.S. average is ~$4k, but this is very local.
• A:  I got this price from the vice president of one of the largest title firms in the area. He gave me a significant "investors" discount to encourage repeat business with him. But, its still nowhere near $4.k for this are for a house this size, from what I've heard.
• Q:  Vacancy is super high. I usually figure 5% for SFR and 8% for MFR.
• A:  I was figuring on 2 months of vacancy, especially during this pandemic. Our area has been hit hard by unemployment. So, I pro-rated many of my vacancy expenses high, accordingly.
• Q:  Repairs and CapEx might be low. Really depends on what's being done in the $30k reno. Are you addressing most of the CapEx items? In most cases I underwrite to 15% combined.
• A:  My exit strategy for the property is Lease Purchase. The house was trashed by the previous tenant, and requires a major rebuild. The roof is newer steel. The furnace and water heater might be replaced (upon inspection), and the electrical brought up to code. So, I figured everything major should last for at least 24-36 mos. (or longer), until I'm able to sell it.
• Q:  Water/sewer will depend on the property type and number of units. If it's SFR, the tenant should pay. If it's MFR, usually $30-40/unit/month. Check with your local water authority.
• A:  These are actual water usage figures I got from the city for the previous tenant. I plan to pro-rate the vacancy usage. However, water in this city accrues to the landlord, not the tenant. Is there anything else I can do other than what amounts to a pass-through of the bill to the tenant's rent? Don't want to be paying for the tenant's wastefulness. But, not sure how to get around that!?!
• Q:  Insurance will probably be 1/2 this. Talk with a local insurance agent.
• A:  I got this figure from a long-time local real estate agent/investor who talked with me at length, sharing some of his numbers. He said getting a policy for a non-owner-occupied vacant property is tough in this area! However, he gave me two agencies to try, and I'm reaching out to them as we speak. He also said they charge him $500-600. per 6-mo. flip.
• Q:  No sure what's up with all of the "pro rated" stuff. What would Gas/electric cover? Like water/sewer, lawn/snow should be tenant-paid in a SFR. Could be $50-150/month if MFR, depending on where you're located.
• A:  Again, I'm trying to account for holding costs during possible 2-mo. vacancies. I wanted to make sure I have gas on during the Winter months to protect the pipes; electric on at all times for the security system; and, I wanted to make sure the exterior (lawn) is kept up. (For instance, I know an investor whose tenants left the mower he provided them out in the rain and rusted it horribly. Then, they loaned it to a friend of theirs who never returned it. And, the yard looked bad most of the time. I'm trying to reduce the cost of "bad tenants", while hopefully not eating up all my profits in the process!)
• Q:  You're not accounting for Property Taxes.
• A:  I actually did include property taxes in the BRRRR form. (Not sure why its not showing up!?!) I got the figures directly from the county Recorders office. And, the $93.33/mo. rate is based on the most recent property assessment. Obviously, I can expect that to increase once the property is re-appraised after reno. But, how much? I'm not sure how to estimate that.
• Q:  What about admin/professional fees?
• A:  Now there's an item that I intentionally took a chance by not including because I'm trying to cut costs as much as possible to get my "first" deal done. I figured, as long as I can bring the deal to fruition, and can pay my bills, I can take my fees out after-the-fact from cash flow and equity. (Not sure how realistic that is though!?!) I've got to do something to overcome inertia, get a "no money down" private/hard money loan, and make this deal happen!
• Q:  No way you're getting a refi rate in the 2s unless this is owner-occupied. More likely in the 4s or even 5s.
• A: I'll bow to your expertise on this one. But, I'm reading that number on several websites of "investment" lenders. (That may be the bottom scale!?!) I've never done a re-fi, even in my former investing days. Not sure how to make that work in the BRRRR scheme. Lenders seem to be hip to BRRRR, and act like they want more of the investor's skin in the game than just increased equity from the reno, in the form of a 25-35% down payment. Am I missing something here?
• Q:  Why do you have an amortization period of 0 years?
• A: Being a newbie to this BRRRR concept, I'm not familiar with amortizing the deal, estimating rent increases, appraisal increases over time, etc. If you have any tutorial links or references (for beginners) which further explain how all this works, I'd greatly appreciate you forwarding them to me!

Thanks for your time and effort in helping me understand the BRRRR investment strategy and this report! I feel good that you seem to think its possibly a good deal!?! And, I look forward to your reply....

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*This link comes directly from our calculators, based on information input by the member who posted.