BRRRR Strategy with a Niche - Oversize Garage/Shop

[Travis Hewlett]

Hey BP,

I wanted to share a deal we just closed on, in a market where cashflow is very tight and hard to find. The deal is in Calgary Alberta, which is currently a buyers market, but still hard to find good cashflowing properties. It's a Bungalow in a great neighborhood that provides a decent spread from purchase price to ARV. We found the deal on the MLS and bought it slightly under market value. The lot has a sloped backyard which drops about 15ft to the alley. We are going to renovate the main floor, add a suite in the basement, and build a large 3 car garage/shop. Because of the slope of the yard, we'll be able to build a deck for the upstairs tenants on the flat roof of the garage, adding bonus value for the tenants in the house.

Before we closed on the property I posted a classified ad to rent garage/shop  for $1000/month. I received a ton of inquiries and found out there is a large need in our market for woodworkers, car enthusiasts, hobbyists, and people looking for more storage. The rent in our market for a typical garage goes for $250-$350, but since we have the space and are building it from scratch, we can add an extra bay and charge a premium. We are also making sure it will have 11-12ft ceilings and a 9ft double car door, to make it attractive to potential tenants. 

Cashflowing $200/door in Calgary is hard to find, but with adding this large garage, we've increased our cashlow on this property to around $1500/month. With the extensive renovation to the property and the garage addition, we should be able to pull out all, or very close too, the initial investment after we re-finance in six months. I am the working partner in this joint venture project with a financial partner holding the mortgage, providing the down payment, and renovation budget. It is a 60/40 split, 60 for the financial partner. We should be have enough spread from the purchase price, renovations and ARV, that we'll be able to pull out all of the initial capital on the re-finance depending on how the appraisals are going in a softer Calgary market

See below for the numbers,

Purhase Price - 360k Down Payment - 72k Closing - 2k Reno's - 120k Holding Costs - 6k LOC Debt Service 4k

Total Initial Investment and Holding costs - 204k

ARV - 520k to 560k Main Floor Rent - $1500 Basement Suite Rent - $1200 Garage Rent - $1000

Total Monthly Income - $3700

Monthly Exp - Mort pymt - $1250   Prop Tax - $190    Ins.  -  $130    Vac Rate 8% (1 month) - $240  Capex5% - $150  Repair(5%) - $150

Total Monthly Expenses - $2110

Total Monthly Cashflow - $1590

We will build up the operating account to around $8000, and then start taking the vacancy rate, capex, and repair budget as cashflow adding another $540/mth to our pockets. If all goes well on the re-finance we'll have all of the initial investment pulled out of the project, or very close too it, providing and infinite ROI for many years into the future, and can recycle the money into the next project.

Filling the need for people looking for a large garage/shop gave us a niche and took this project from average to amazing returns. Hopefully this helps anyone who's struggling to find cashflow in more expensive markets with typically low cashflow. Feel free to reach out with any questions regarding the deal, our market, or how we structured the joint venture. Happy Investing,

Travis Hewlett