My First BRRR SUCKED

[William Kwong]

Been reading some interesting post on BRRR experiences so figured I'd share mine as well - NIGHTMARE!!!!

--------------------------------------------------------------------------------------------------------------------

Purchase a multi-family end of 2016, utilized a 203K loan to gut the entire property.

Got taken advantage of by my contractor (1 guy would come, move stuff around , chip away at a few pieces of tile and leave. Or not come at all. Didn't have skin in the game back then and I trusted him / I was TOO nice.)

Apparently took 4 months to pull permits. This particular city it IS a major pain but that's just absurd. He continually told me that he that he was going to the office to check-in on the status, submit new docs, etc. - Learning lesson, go to the city yourself or call to make sure they're not lying to you.

After a year and 3 months long (having threatened to fire him multiple times) we finally finished.

I budgeted 6 months of no rental income but got screwed since it was 1 year and 3 months.. (opened 3 credit cards 0% interest for 21 months - I paid those off.)

I got the rental income I needed to break even and then some / live for free. 

But I only made it to BRR... I'm a real estate agent in the area and know this market very well. But appraisal came back WAY lower than anticipated. I'm hearing similar stories by other people.

Comps were garbage (only 1 of which was even renovated). The others were old and ugly, 1 house had a unit with just a stove & no kitchen... LOL?

With 75% LTV for multi, there was no possibility to cash-out refi or even rate/term with how low that appraisal was.

I'm saved by the high appreciation in that area (hipster coffee shops & Vegan breakfast cafes! Wooooo!) 

Going to put my focus on flips and saving to build more capital for the next one.

Lessons learned...

- Be respectful but don't be a push over. 

- Just because they call you bro, man or dude, doesn't mean they're your friend.

- Set up a SOW from the beginning with timelines. (Towards the end, I forced him to make a schedule outlining everything for two weeks at a time. I had to walk through the property daily, and if certain things weren't done or delayed due to unforeseen events, something from week 2 needed to be swapped with that that part of the project to eliminate time not utilized.)

- Keep track of materials purchased, at the end my contractor wanted an additional 30K to be reimbursed to him from the bid. I had an itemized spreadsheet of material costs from grout to cement backboard. I was able to counter that 30K to 0. (Ex. Said the spiral staircase was 7,000. But I saw the receipt for $2,500.)

- Take everything with a grain of salt.

- Stay positive & resilient

On a good note, if I were to make this a long term flip and sold today I would profit 3x what I put down. Thanks to the 203K loan, even though you are a PAIN. Just PLEASE be cautious of contractors, know your numbers, and maybe make appraiser friends.  :) 

Please learn from my mistakes lol cheers..