Another BRRRR, Another "Free" Property

[Blake Edwards]

It's still a surreal feeling when you do your due diligence, research and run numbers correctly and get a check back for the exact amount you put in.

We found this one from a Wholesaler in the area and we jumped on it.  Older individual owned it and let it go.  We put in new flooring, paint, updated bathrooms, tore down the detached garage and installed a new carport.

St. Louis MO (2 Blocks from Carondelet Park)

Purchase Price - $55k

Rehab - $40k

Closing Costs (Including down payment) - $13,131

Appraised - $145k

All In - $95k

Rent - $1200

Refinanced and pulled out $13,200

Cash out of Pocket - $0

Cash Flow - $295/month

[Jay Hinrichs]

Originally posted by @Blake Edwards:

@Jay Hinrichs - Wow...  Thanks Jay (Or should I say Mr. Hinrichs).  I see you active on these forums a lot giving out great free advice. I look at it as an honor you saw & replied to my post.  Thank you for the kind words.  

We agree, a good relationship with your lender whether it be a bank, HML, or Vinny from down on the corner is key. That's how we were able to finance our $18k property as well ;)

We thought it was a cute house as well and in the back of our minds kept thinking we were missing something because it was such a good deal.  Just We could have easily talked ourselves out of it.  Goes to show you the power of taking action.

there are a whole new crop of investors.. however the BRRR strategy was invented in LA for out of area deals exactly like yours.

and my company played a prominent roll in it from 2001 to 2008 when it all came crashing down :)  IE refi's FRoze like antartic.. its has taken a decade or so to get the banks to come back to this model IE cash out refi's.

In my day it went like this.

LA investor listening to a Saturday morning real estate radio show hosted by Mike Harris ( he is still on by the way) at least he was last year. it was called real estate round table.. he would talk about investing and mortgages and they created leads.. those leads would then go to providers in the mid west.. and those providers would rely on my HML company to make the loan to the LA client for purchase and rehab. Mike would have the buyer all approved up front for the take outs.. and we usually did 2 to 4 at one time.. So I required the solid underwriting Mike did and proof of take out.. and the LA buyer would have to put 1k down per house.. I would then lend the money to them and they would buy from one of my mid west vendors .. mid west turnkey vendor would then buy and rehab .. once rehab was done we already had the ARV appraisal done for the refi.. it was just a matter of getting a 442 reinspect and closing.. my average HML turn over in 91 days and I did about 60 of them a month for LA based and San deigo based investors with some in the Bay area and other parts of the country but SOCAL is 90% of the buyer base that's why all the marketing channels for turnkey are pretty much based in Socal and or CA.. its where the buyers come from you know the story... prices to high in CA need to go out east.

So now we put LA investor into 4 homes day one for 4k out of pocket.. they get rehabbed and refi goes through they get 5 to 10k cash back per home.. so they get their 4k back plus 16 to 30k in their jeans.. and in those days cash flow was 100.00 a house.. 

We were all printing money back them  LOL.. But 08 hit and I got stuck with 450 loans on the books that could not refi because refi lenders Country wide Wells etc all pulled out of the market.. so I ended up foreclosing on about 200 LA investors and owing the homes. Only to have the values of rentals drop like a rock.. so we got hammered very hard.. but that was then and now is now.