All Forum Posts by: Sharma Parth

Hello Sharma, overall this looks like a solid deal but I do have a couple of thoughts!

1. You should run your numbers for at least a 6 month repair time. Of course your want to get it done sooner but things happen and you dont want a couple of extra months to break your deal. 

2. Your monthly HELOC payment is way, way, way too high. I am not sure if that was an error or they are trying to rip you off. Even if you borrowed $130,000 which is more than you need at 13% which is what BRRRR lenders would charge a newbie, that is a monthly payment of about $1,450 and you would probably pay 3 points up front which would be about $4,000. If you cant find cheaper than that with a heloc than just use hard money.

3. You should plan for a larger repairs/capex/vacancy budget. The unfortunate truth about cheap properties is that a hot water heater and a roof still cost about the same as a proprety in a more expensive areas so your repairs/vacancy/capex is going to eat up a larger % of the gross rent than a more expensive property even though the $ might be similar. For instance, a new roof is $10,000 or more in a lot of places right now. At this repair budget it is going to take you 6 years to save for a roof which is a long time. Unless you go into this deal with $15,000 or more in cash reserves you should expect to put away all cash flow into reserves until you reach this number

4. Talk to someone experienced in flipping in your area and maybe a good investor agent about the ARV. This is the #1 place that newbie investors lose. It is very easy to overestimate and suddenly need to come up with $30,000 out of pocket.

5. Verify your rehab budget with a contractor first. 

Let me know if you have any further questions!

Hello Sharma, overall this looks like a solid deal but I do have a couple of thoughts!

1. You should run your numbers for at least a 6 month repair time. Of course your want to get it done sooner but things happen and you dont want a couple of extra months to break your deal. 

2. Your monthly HELOC payment is way, way, way too high. I am not sure if that was an error or they are trying to rip you off. Even if you borrowed $130,000 which is more than you need at 13% which is what BRRRR lenders would charge a newbie, that is a monthly payment of about $1,450 and you would probably pay 3 points up front which would be about $4,000. If you cant find cheaper than that with a heloc than just use hard money.

3. You should plan for a larger repairs/capex/vacancy budget. The unfortunate truth about cheap properties is that a hot water heater and a roof still cost about the same as a proprety in a more expensive areas so your repairs/vacancy/capex is going to eat up a larger % of the gross rent than a more expensive property even though the $ might be similar. For instance, a new roof is $10,000 or more in a lot of places right now. At this repair budget it is going to take you 6 years to save for a roof which is a long time. Unless you go into this deal with $15,000 or more in cash reserves you should expect to put away all cash flow into reserves until you reach this number

4. Talk to someone experienced in flipping in your area and maybe a good investor agent about the ARV. This is the #1 place that newbie investors lose. It is very easy to overestimate and suddenly need to come up with $30,000 out of pocket.

5. Verify your rehab budget with a contractor first. 

Let me know if you have any further questions!

Quote from @Sharma Parth:

Hi guys - would love any feedback on the below numbers I am crunching on a potential BRRRR deal.

The plan is to hold on to the property, rehab it, rent it, and then do a cash-out refinance. Not looking to do a flip here.

I'm a rookie too but for every estimate I've done and ran by the team that helped me secure my first property (just closed two days ago!), I was setting aside 5/5/5/10 for the place concerning vacancy, maintenance, PM, etc. and was told that's fairly accurate.

In my market that cash flow would be nice. Another wall I just hit that I'm navigating is I apparently underestimated Landlord insurance cost, which is biting into my bottom line.

Just considerations I'm finding! Good Luck!