BRRRR Strategy in Tucson

[Benjamin Riehle]

What’s up BP! My team is finishing a project in Tucson for another out of state investor. Leave a comment with your questions or thoughts. I am passionate about helping others learn how to build wealth through real estate, let me know if there is anything I can do to help you on your real estate journey.

Now onto the project! We were able to pick this project up off the MLS, Tucson is a competitive market, being able to act quickly and efficiently is the difference between doing the deal and missing out on the opportunity. Shortly after this deal hit the MLS we had a cash offer that was quickly accepted. We then assigned the property to an out of state investor that we have worked with before. (if you would like to learn more about how we find, and track off-market deals check out https://www.biggerpockets.com/forums/311/topics/556219-flip-in-the-historical-district-of-downtown-tucson )

Once under contract, our construction team put together a comprehensive estimate for the remodel and our investment team began running a financial analysis and a market CMA. The net to the investor is after the wholesaling fee, project management fee and real estate closing costs. The investor's initial plan was to flip this property, however, because of the changing area he was also interested in a BRRRR model and holding as a rental. We began marketing the property as a fully renovated rental once the foundation for the new addition was poured. Our management team was able to get the property leased for August while the home is still being built! The project should be complete in July, at which time the investor will perform a cashout refi leave just over $25,000 invested in this project. He will have strong rental cashflow and substantial equity gain from the forced appreciation as well as neighborhood growth and increased demand. I will update the post with pictures of the finished project.

 Project Break Down:
1.Before: 2 beds 1 bath house
2. After: 5 beds 3 baths house 
3. Added 1200sqft
4. Highly appreciating area
5. Large Patio for Entertaining
6. Large living room
7. Rent for $2,300mo

There is a substantial amount of growth going on in Tucson right now, causing rapid appreciation. Culinary Dropout and Orange Theory Fitness are opening right down the street from this project. Along with the expansion of Grant Road, we predict that homes in this area are going to increase in value, rapidly.

Financials:

Purchase Price	$112,500.00
Renovations	$140,000.00
Total Investment	$252,500.00
As A Flip:
ARV	$300,000.00
Closing Cost	7%
Net Income at Sale	$279,000.00
Total Profit	$ 26,500
ROI	10%
Annualized ROI	13%
As A Rental:
Rent Income Month	$2,300.00
Yearly Rental Revenue	$27,600.00
Yearly Expenses (35% Exp. Mult.)	$9,660.00
Yearly Net Income	$17,940.00
Mortage	$15,336.00
Yearly Cash flow	$2,604.00
Cap Rate	7.10%

The investor is using a BRRRR investment strategies and will be able to pull out most of the cash from this project. He will have about $30,670 of equity built up, which will increase with the change in the area.  

BRRRR Strategy
Total Investment	$252,500.00
ARV	$300,000.00
Cash-out Refi Loan (75% ARV)	$225,000.00
Cashout Refi Down Payment	$27,500.00
Cash on Cash Return as Rental	9.47%
Forced Appreciation Gain	$47,500.00
5 Year Appreciation (4%)	$64,995.87

 
If you have questions on the financials or would like more detail, please leave a comment below.

Happy to discuss in more detail.

Pictures below: