This Week In Tucson - Vol. 2 – BRRR STRATEGY

[Benjamin Riehle]

A recent post that I wrote discussed exit strategies on a property that we’re converting from a 2 bd/1 bth to a 5 bd/3 bth. Now, we just purchased another property right down the street. This property also has multiple exit strategies. With this one, it was previously on the market for 6 months and the listing agreement actually expired because of a pricing issue. Because we are heavily invested in the area, the city is bringing in thousands of jobs, and the University of Arizona is continually expanding, we were confident that homes would appreciate substantially over the next few years. Once we saw that it expired, we tracked down the owner and were able to strike a deal that benefited both sides.

Rundown of the Deal:

The property is currently a 3 bd/1 bth, 962 sq ft house a few blocks away from the University of Arizona. We purchased it for 120k and we will be updating the current interior and exterior. In the end, we’ll have a completely updated property. With this one, we want to rent it for a year or two and then we’ll sell it. Now, what do the numbers look like after Buying, Rehabbing, and Re-Financing?

1 – Rental Return with Cash Purchase

Purchase: 120k

+Renovation: 35k

All-In Budget: 155k

All-In Budget: 155k

Market Rent: $1300/month

% Towards Expenses: 30%

Annual Cash on Cash Return: 7.04%

2 – Re-Finance After Rehab

Appraised Value: 185k

75% LTV - $138,750

Cash Still Invested - $16,250

3 – Rental Return After Re-Fi

Cash Still Invested - $16,250

Market Rent - $1300/Month

% Towards Expenses: 30%

Annual Cash on Cash Return: 67.2%

We’re very excited to break ground on this project and once we begin construction, we’ll be sure to update everyone on the progress.

Stay tuned!

Also, I've posted some before and after pictures of past projects that we've done in Tucson!

Hope everyone has a fantastic Labor Day!