First BRRRR property purchased & the rehab begins!

[Gurshan Bansal]

The Prep

Along with the standard REI education you get from books and podcasts, I created a set of OKR's surrounding REI that would serve as the roadmap to purchase the first investment property. One of the KR's was to speak with at least 3 real estate investors per week, for 6 weeks straight, who actively invest in the Memphis market with ALL levels experience. Each conversation was an opportunity to learn more about how the Memphis REI market works and what strategies are successfully being executed. I lived in Memphis for 18 years, but I don't know how the REI market/process works there.

This action of connecting and speaking with others was by far the best education and the catalyst that led to closing my first BRRRR deal.  

The Buy

I probably looked at over 100 deals where I plugged the numbers into a spreadsheet. I used sites like zillow.com, realtor.com, realtytrac.com, and rentometer.com to pull my numbers. Before the spreadsheet, I was analyzing one deal a night... after the spreadsheet I was able to get about 3 or 4 in, depending on how many deal emails I had in my inbox. 

I used a mix of agents you probably see on BP forums that actively work with Memphis investors and a few wholesalers before I found the property where the numbers made sense for me and I went for it. I purchased the property from a wholesaler that I met through a referral from speaking with other investors in these forms! Thank you DW & Bigger Pockets for being a truly amazing network! 

The house is in Raliegh, a suburb in Memphis. I purchased the property for $57,000 and found comparable ARV's to be in the $85,000 > $95,000 region. 

For my first investment, I wanted to start small and this worked for me. 

The Rehab

I have had 2 contractors look at the house. My budget is $14,000 for the rehab and the house is not in terrible condition. It was rented out for $750 per month when I purchased it with a single tenant. I have received two bids, one for $17,500 and one for $11,000. 

The biggest project is converting the garage into a bedroom. The garage is already sealed off and has a heating and cooling vent inside the room, but no window or closet. I am hoping turning this space into an additional bedroom will push the ARV closer to the $90,000 +. There is also the washer and dryer in this room and I plan on separating that into its own laundry closet so you do not have to enter the new bedroom to reach the laundry room. It's possible to get $900 rent in the area. 

The power is being turned on Monday, Feb, 8th and work should be completed by mid-march once I select the right contractor. 

Rent

My strategy here is simple, Memphis has a few options when it comes to property management. I first purchased a house in Memphis in 2014 as a primary residence. I moved to Atlanta for work in 2015 and self-managed that property for the next 3 years (bad idea). In 2019, I decided to use Renshaw Property Management for that property. For the BRRRR property, I have selected a different PM company so I can compare the experiences. For the next one, I will probably use another one as well... Why not?

Refi

Work in progress - I found the bank, but I need to wait for 6 mo's to refi.

Repeat

Stay tuned for July!

Learnings

It's interesting to note that although I examined over 100 deals... I only put offers on 2 houses. This was an area that I was not very strong in and a lot of has to do with numbers not making sense, but I also missed out on opportunities where I could have at least attempted to offer for $10,000 less than the asking price... This really slowed me down IMO.

I did not include the rehab bids with the purchase price into ESCROW when I made the offer on the house. This delayed the ability to refi sooner. 

There is probably more to add to this, however, that is all for now. 

Happy investing!