Our first BRRRR, now up to 10 units, 1 year later

[Robin Norman]

Been following the forum for a few years passively, figured I'd share how our 2019 went with our first BRRRR.

Grew up building houses so I thought a remodel would be a cinch. It wasn’t, at all.

Signed contract in Nov 2018 for two houses on the same parcel. Green House and Purple House. $50,000 after closing. No money down financing from my banker because it appraised at $78,000. “As Will be” appraisal came in at $133,000 so the banker let us put our sweat equity into the property. Deferred payments for 8 months while rehab. Banker approved $10,000 remodel draw account.

Purple house: Painted the cabinets, fixed a small plumbing leak, moved in a Section 8 Tenant @ $900 a month on the day of closing (advertised the property during the 45 days between contract and closing, had the property inspected and approved by DCA, tenant ready to go). Didn’t even change the locks. We are on a budget people. Collected $1,800 on the property within 32 days of owning it. Off to a good start. Named house “Smoochie” from that Robin Williams/Edward Norton movie, and well because its purple.

Green House. Extensive way over budget project. Contractor that we paid $7000 to jack the house stopped and wanted more money, I told him to leave, we can handle it (he didnt know ill do whatever is necessary, including jacking a 70 year old house with harbor freight bottle jacks to tear out main beams) I was there every day after work and every weekend putting in the sweat equity for months. The fact that our local building official is a toughy did not help the situation. Just about a total gut out. $20,000 bank draw (had to ask for another $10,000 from banker), $10,000 out of our own pocket, $5,000 personally to get it done. Unless otherwise notated by which contractor did what, we did that ourselves.

1. Removing asbestos from the front of the house
2. Cutting out the bottom plate in front of the house, some stud walls, and replacing them
3. Jacking the house level/Foundation lean (contractor to handle this quit about ¾ the way done and held the job hostage for more money. Told him to leave ill do it myself.)
4. Bad sill plate on rear corner (contractor)
5. Replace front porch posts
6. Build backporch steps
7. Demo barn
8. Installing concrete footers under home, laying block and shimming to your jacked level
9. Setting house back down on blocks and reattaching to foundation
10. Remove floor and portions of subfloor in kitchen & back porch and replacement
11. Window repair
12. Temporary power pole (electrician)
13. Electrical service upgrade, outlet replacement and GFCI Install (mix of Electrician and us)
14. Label panels (electrician)
15. All exposed wiring must be protected (basically just replaced all of it)
16. Replace missing light fixtures (new fans throughout)
17. Build wall in living room to convert to 3rd bedroom
18. Re plumb house and pressure test plumbing (plumber)
19. Install smoke detectors hardwired to meet code (electrician)
20. Water Heater electrical line, and core discharge for water heater under house (plumber)
21. Tear out Old ac unit under house
22. Window screens
23. Window locks
24. Backflow prevention valve (plumber)
25. Fart fan ventilation for bathroom
26. Approved Address Number Displayed
27. Flaking paint abatement interior
28. Clothes Dryer exhaust
29. Paint Untreated wood
30. Remove all debris, Remove old tires
31. Remove chain link fence
32. Treat house for black ants
33. Poly floors
34. Mud and paint walls
35. Appliances
36. Doors/locks.
37. Roof patch, remove 12x24 section, cut out rot, sister in new beams, put new plywood & shingles
38. Piles and piles of new electrical wiring (electrician/us)
39. Sand all walls and spray texture ceiling and walls with joint compound
40. Paint whole house inside and out
41. New trim everywhere.
42. Sand the every living hell out of the floors (100 hours of labor + help)
43. Gutters and french drain
44. New mailbox
45. A/c Unit. Worked all summer in this house, under this house, on top of this house in south Georgia heat with no a/c until a week before we rented it (5 month project), A/c Unit broke twice, not enough money to replace, A/c Man finally fixed it good. New Thermostat
46. Gut the kitchen to the bare dirt. Replaced and sistered a lot of 2x8s, polyed and put back, new faux wood flooring and ¾ subflooring. Handbuilt some OK cabinets.

After Appraisal came in at $133,000 as expected after $40,000 repairs. Bank loan financed $70,400 @ 6.75 for 12 years, $714 payment (both houses combined). Rented green house (now red house named Ron Burgundy) for $668.00. Purple house rents for $900 a month different client now after an eviction. Properties are now stabilized.

Loan $70,400

Payment: $714.00

Term: 12 Years

Insurance: $115 a month

Property taxes: $100 a month

On going maintenance: $100.00 per month

Gross Revenue: $1568.00

Expenses: $929.00

Net: $539 free cash flow.

Time to Refinance and repeat.

Been operating an 8 bedroom rooming house for a year for a guy. About to close on it. $138,000 plus closing costs is gonna be around $145,000. Fresh off the remodel, we don’t have $29,000 on hand for a down payment. Time to tap equity.

80% of $133,000 appraisal is $106,400. Less $70,400 original loan amount is $36,000. Boom, down payment secured.

8 bedroom rooming house. Average rent collection $4,400 given vacancies

Utilities we pay: $700 a month

Repairs: $200 a month (some improvements built in there)

Insurance: $80

Property Taxes: $125 per month

@ 12 years= $1,471 payment.

Net cash flow: $1,824.

Appraisal come in at $150,000 today.

Combined the properties should cash flow over $2300 a month. Started project exactly 1 year ago this month. 10 doors and growing.

Started from scratch, no help financing, don’t have stellar credit, don’t have anybody quietly backing us financially. Just hard work and that rise and shine get r done mentality. 

For those of you wanting to get into the market but haven’t yet, find a property you want, get a plan, put it on paper, tell the banker (or 20) what you are going to do and what you will achieve, and sign on the dotted line. Takes balls and there were a lot of nights me and my partners (one is my wife) that we didn’t know if this projet was going to make it or not. But it works out because it HAS TO. There’s no failure. Success is having enough provision to accomplish the task. Thats something we have learned the hard way.

If you’re a first timer like we were, and want to walk a hard line on a budget to make this happen, understand that we did this with only me a personal guarantor, and $5000 in the bank from selling some golf tickets. That’s it. Go get r done.

Any questions?