My First BRRRR - Deal Analysis

[Matthew Tyer]

As the title suggests, I am in the process of investing my first BRRRR home. I am looking for guidance & suggestions from experienced investors. A little bit about me - I am 28 y/o & live just outside Houston, Texas. Working as an operator in a chemical plant. It is shift work on a rotating schedule of days and nights. This is my main motivation to getting into real estate. I want to break away from shift work completely and eventually become financially independent and invest in real estate full time. I am wanting to scale my business as fast as possible so any suggestions on how to do that would be much appreciated. I named my company DoorMatt Properties and my purchases will all be under DoorMatt Properties, LLC.

The home I'm purchasing is a SFH 3bed 1bath & 816 sqft pier and beam (HUD home). I am purchasing the home for $28,000 from a wholesaler with cash out of my own pocket. In addition to the $28,000 there is a $300 wholesaler fee and then closing costs which I estimate to be no more than $2,000. My total cost for acquisition will be in the ballpark of $30,000. I found a very knowledgeable and experienced GC that is also a real estate investor himself and he quoted me at $30,000 for the repairs which I will also pay in cash out of my pocket. Repair time is estimated at 2 months. All in, I should be around $60,000. The ARV of the home will be in the ballpark of $80,000-$85,000. Rental comps in the area are around $900-$950.

My expenses before the cash out refinance will be minimal. Yearly property taxes around $600. I have not done any insurance quotes yet so any insight into that would be helpful. Still deciding on what utilities I will be willing to pay if any. (Gas, water/sewer, trash, lawn care etc.) I found a property management company that charges 10% of the monthly rent. They will take care of minor maintenance issues up to $300. Should I also be putting 5% away on top of that for maintenance repairs? What about capitol expenditures? Vacancy? With all of these, I will be at 25% of my monthly income getting cut out. The main reason for acquiring property management is the fact that I work shift work and long hours and I will not always be available to help with Tennant needs. I would love to manage the property myself & for the first couple of homes but it is just not practical for my situation.

I found a local credit union that will cash out refinance at 80% LTV. Since I am not taking out a loan to begin with is there a seasoning period still or can I cash out right after I get a Tennant in place? Or should I at least wait a few months to show steady rental income that will count towards the loan?

With this, if the property appraises at the conservative number of $80,000 then I should be able to pull most if not all of my cash back out of the deal with the 80% LTV. ($64,000).

New cash out refinance loan ($60,000 + wrap closing costs in loan) at 5% interest for 30 year fixed with no outstanding mortgage balance. P&I $350 - Property tax $50 - Insurance $80 TOTAL: $480 a month. My expenses for property manangment $95 - Cap expenditures $50 and Vacancy $50. This brings my new total for expenses to $675. If I charge $950 a month in rent this will cash flow me around $275. I am curious if there is something I am missing or if I calculated this out correctly.

How does this above deal sound? I need honest opinions. At the end of the day my main goal is to pull my cash back out of the property. I apologize in advance if my post is all over the place. I tried to make everything as clear as I can.

-Matt