Anyone doing Brrrr right now in Orlando and surrounding areas?

[Mark Vivanco]

I am new to real estate investing.  I'm trying to do my homework as much as possible.  I'd be a remote investor.  I'm looking to buy in the "Orlandoish" area since I will retire down there in 10-15 years.

I took a step forward by reaching out to one of the bigger, more popular, property management companies that serves the Orlando area.  I was advised that Brrrr isn't right now for Orlando and surrounding areas.  He said I will be almost impossible to find a property. He is advising me to go in the direction of a single family new construction which seemed a bit odd to me.  He is going to send me the prospectus tomorrow.  Said there should be about a $300 positive cash flow.  He said the new construction, is around 150-170k. While that might be OK, it would tie up all my cash and thus I'd have to save up to get into another investment. 

Anyone doing Brrrr right now, or recently, in Orlando or surrounding areas?

[Russell Holmes]

@Mark Vivanco that PM you talked with sound's like he's aiming to steer you to the highest gross rent meaning the highest fee for him. I wouldn't be surprised if his idea of 'cash flow' is Gross rent minus the mortgage payment.  That's not cash flow and you'll lose money annually if thinking it is. New construction from a build-to-rent perspective might be feasible with the right connections, but going to pluck off a builder home at a slight fear-based discount isn't going to get you cash flow. 

I'm a Realtor in Apopka, Northwest of Orlando by about 20 mins. I have sold some Orlando properties, but the majority of buy and hold deals I have found have been in the areas 20-45 mins from Orlando to the North and Northwest. Commuting distance, but somewhat of 'bedroom communities' in a sense. It's a sweet spot of lower prices with enough employment to keep rents up higher. Forget BRRRR, it's hard to find a basic cash flowing rental in Orlando Proper. Stretch your search to places like Eustis, Mt. Dora, Apopka, Longwood, Winter Springs, and you start finding pockets of higher rent near hospitals, toll roads, SunRail stations, while homes are more affordable.

I'll be closing on an almost 'accidental BRRRR' with investor buyers in Eustis sometime next week. It's maybe 45 mins from Orlando, but only 15 mins from being on the 429 toll road, 10 mins from quaint Downtown Mt. Dora, plenty of employment within 5 miles. It's a 919sf 3/2 house in an improving C- neighborhood with a brand new roof and roof deck, water heater, and paint job. There's some public housing nearby, some run down houses, but overall most are decent, it's quiet, well kept, lower crime, working-class area. Not a great neighborhood, but it's not 'bad' or 'rough' either. Even the public housing nearby has trendy paint colors, new roofs, no smoking anywhere on property, and the place is almost empty on weekdays meaning they all likely work. A couple blocks to the south it gets into C+ and B class areas of larger historic homes in the $200k-500k range.

I say accidental BRRRR because it wasn't the primary goal on our search. I agree with Tyler that BRRRRs, at least ideal, full capital return BRRRRs are tough to find in this market. But good almost-perfect BRRRRs are out there, especially now that many flippers are sitting on the sidelines for a bit to see what things do. Many hard money folks have stricter guidelines and lower LTVs.

These buyers I'm closing with just bought a 3/2 house and 1/1 guest house nearby in Eustis for $196,500 that grosses $1900/mo. rented to solid and clean tenants. There's some room to raise rents in time, they'll add a water meter to split that bill and cut expense, and they got it for at least 10% less than full retail if the seller had cared to push it. He was an investor and Realtor and valued a smooth and quick sale over some messy offer that was a little higher. We closed that one 4/15 and started the hunt for deal #2. No capital-return planned on that two-unit right away, it's just a good solid rental property for a great price. With COVID fears around and a lack of good house/ADU properties (looked at several) we started making aggressive offers on little single family homes nearby.

Accepted offer price to close as soon as title can pull it off: $97,000 with a $970 credit to buyer closing costs. Cash deal

Rehab estimate based on contractor bid and materials estimates: $15,000 (New kitchen, new bathroom vanities, a little termite repair, new pre-hung interior doors, one new window, new driveway, fence repair, etc)

Time-line: 2-3 weeks

Market Rent (likely Section 8): $1150-1250/mo.  Probably higher end of that, but being conservative.

ARV: $140-150k. Again, if this were February I'd say $150k all day, but even $140k would be fine.

My buyers were going to do this with a 20% down loan and pay rehab out of pocket to refi down the road sometime, but it would have been quite a bit tied up for the time being. They wish to keep buying properties but don't have unlimited funds to keep putting 20% down forever. So BRRRR was on our mind for now, but wasn't a necessity. However, seeing that they'd spend as much on closing costs as a large portion of rehab, say the Driveway for example, they opted to go cash to then only pay lending fees/costs once on the final refi. We're searching for leads to refi based on appraisal in under 6 months, but we have one that will do it at 6 months, not the worst thing.

If it appraises on the low end at $140,000 and they can only pull 75% instead of the ideal 80%, they'll pull $105k out minus closing costs one time.  That'll leave about $7k of their capital in the deal, or about 5% of the total.  They'll have a loan for $105k meaning there's $28k of 'free' equity they built by spending $15k on rehab and buying it at a great deal.  Insurance is $650/yr, property tax, thanks to the low sale price, will be about $1800/yr.    After refi, they'll have almost all capital back and a solid little cash flowing rental in a growing area.

Not every BRRRR will have numbers to return every dime of your capital, but that's ok. If after the final refi you've only left a small amount in the property, you're way ahead of buying full rent ready properties with 20-25% down.