My first BRRRR ended with me writing a check at the refinance instead of receiving one

The sewer scope thing nearly got me on a house I walked away from for other reasons. Seller had a fresh cleanout and I later found out the line had been rodded four times in two years, which the neighbors knew and I didn't. 250 for the camera is the best money in this business.

Two separate mechanisms bit you here, and it is worth keeping them apart because they have different fixes.

The first is scope risk. Below grade systems, the sewer lateral, the electrical service, and the foundation are the items that turn a 26k rehab into a 38k rehab, and they are the items that a walkthrough cannot see. Diligence on those is cheap relative to the exposure, and on a distressed purchase the inspection window is where that money should go.

The second is exit valuation risk, which is what actually cost you. Bedroom count is a discrete adjustment in most appraisal work, meaning a two bedroom and a three bedroom are usually treated as different products rather than as a square footage difference. If the supporting sales for your ARV were three bedrooms, your 165k was never a two bedroom number. An appraiser doing a pre-rehab as-completed opinion, or an agent who will pull only same bedroom count sales within a tight radius, would likely have told you that for a few hundred dollars.

On the outcome: a 112k payoff against a 105,750 maximum loan meant you were always bringing cash unless the appraisal cooperated. Sizing the private loan so that the payoff sits below roughly 70% of a conservative ARV is what protects you from that. Cash-out limits, seasoning requirements and appraisal rebuttal processes vary by lender, so ask your lender in writing what their rebuttal process is before you order the appraisal, not after it comes back.

The house at 1,250 rent and 90 a month of cash flow with 40k in it is a slow asset. It is not a wipeout.

Add one to your list: read what the private note says about extension and what the refi lender's docs say about prepayment before you sign either. On the deal I read closely, the bridge note had a 1% extension fee per 30 days after month six and the takeout loan had a three year step down prepay, so the two documents together decided how much time I actually had to fight an appraisal. Nobody mentions that when they hand you the term sheet, it's four pages in.