BRRRR First Step: Buy the property!
This is The Treehouse, it’s located in our target market, minutes from several large employers, a major university, restaurants & shops, etc.
Purchase Price: $40,000
Renovation: $49,000 (renovations, holding, and closing costs)
Total Project Cost: $89,000
Financing: Hard and Private Money
Total project cost: $89,000
We recently completed the refinance for this property, it appraised for $137,000.
Here are some things we consider in the buy phase of a BRRRR project!
Target Market
Availability of properties, cost to rent ratio, rental demand, any major upcoming market shifts (major employer moving in or out, college closing, increased new development, etc.), & landlord tenant laws.
Financing
What will you need to qualify for the loan, interest rate, origination points, prepayment penalty, amortized or interest only, balloon, term, fixed or arm, etc.
Will you be raising additional capital beyond the purchase cost for the holding costs, renovation, etc?
Project Cost
The total project cost needs to be no more than 75% of the after repair value to refinance the cost at the end. Total cost includes purchase price, closing costs, holding costs & rehab budget (+contingency for both) and refinance closing costs.
Once you determine what type of property you’re looking for and where you’re looking; you can look for properties on the market, through a wholesaler, auction, or by developing a direct to seller channel.
Leave me a tree in the comments and I’ll DM you why we call it the treehouse.