First BRRRR Finalized!!!!

[Chris Svendsen]

I am happy to say my first BRRRR is officially completed. We purchased a property November 2016, thought was going to take 3 months to renovate, ended up taking a year, got rented right away and then nothing for 7 months.

Then, we put offer in on a rental property for students housing at university. Deal was struck but one problem, had no funds for closing. Great news had property we renovated with over 140k in equity in it. Had our credit unit do a HELOC on the investment property, pulled out 85k then took 21k of it to use for closing cost on new property which settled today. Everything thing worked great and best part of HELOC is we are only paying on cash I need to use at this moment. Now still have 64K left which planning on using to secure 2 to 3 additional properties. After closing today went and toured a home that may be possibility. Amazing that I possibly will be able to use one house to secure 3 or 4 other homes.

Anyone out there still on the fence, BRRR works and is a great way to go. We lucked out that this next rental needs less than 2k in work, already has 2 tenants signed up and was able to secure a 3rd before even settled on property. Heck, not only did I secure a tenant for a 2 year lease, she paid first 6 months rent at once, before I even owned the property. Student rentals with well to do parents are a wonderful thing! Mom even asked if would be okay if she paid every 6 months so that she doesn't have to worry about paying it every month. That will be just fine!

We were able to secure this house for 78k, mortgage with taxes and insurance is going to be $432 and will be bringing in $1125 a month. After expenses we should be cash flowing about $525 a month and have zero of my money in the deal. Oh, and house was on the MLS and got same interest rate I got over a year ago on first property. Deals are out there people, you just need to find them and make it work.

Thank you BiggerPockets for all the wisdom and confidence you have given my wife and I to venture into the world of real estate investing.

[Chris Svendsen]

@Shane Albert

I had the same struggle and still do.  It all comes down to time and money it cost to do yourself.  We had to do a lot to the first house.  House was a log home built in mid 1800's with 2 additions built onto it over the years.  We had to redo all the plumbing, add a ton of electrical, fix lots of drywall, convert one room from a large recreation room to a bedroom, bathroom, closet, and laundry room, completely redo another bathroom, replace windows and exterior doors, add a kitchen where there wasn't one, paint entire house and flooring.  Ended up with a 4 bed, 2 bathroom house.Was a huge undertaking.  Best thing I did was hire out drywall work. They got done in 3 days what would of taken me a month to do.  

I figured it would cost us about 30K do do the work ourselves which were were faily close on, ended up at about 33K.  But, carrying the house for a year, plus utilities cost us almost 10K in out of pocket expense, then all the additional rental income missed over that year, which would be about 8K we really lost another $18k.  So honestly we had just over $50k into renovation.  I could of spent that money on a contractor to do a majority of the work and been out of the house much faster.  That is when I realized while I saved myself money, in the end I cost myself money.  Still would of done some work myself but should of hired out the bigger projects.  

As far how distressed you go, that all comes down to the numbers. Figure out how much you are going to have into the property and if you will recover your money in a timely manner. We bought the house for $100k, put the above $55k into renovation and holding cost, and have a house now valued at $225k. At end of day we got our all money back with HELOC, have a mortgage payment of $623 on property, collect $1450 a month of rent, and have minimal expenses on property. I set aside $100 a month for misc expenses. We are making an just over $700 a month cash flow on property. As for cost of HELOC, that is going to be spread accross the other properties purchased and figured into their cash flow numbers.

Used a national bank for orginal purchase and HELOC. Went to all local banks in area and rates were higher and more pain in the *** than the big guys were. Seems backwards of what everyone else is saying but so far working for me.

The house purchased yesterday I spent day doing small projects-door locks, replaced a door, added alarm and home automation system for remote management, and fixed a leaking plumbing valve.  Paying a contractor to replace front steps and some drainage lines for gutters.  My thought now is that is it is going to be able to be done in 2 days or less I will probably do the project, longer and more in depth projects will be contractred out. Besides, the house paying for the work being done with cash flow, why not let it make my life easier.