Successful BRRRR Albuquerque?

Question

Who has done a successful 2+ unit BRRR in ABQ?

Please bestow some knowledge/experience, I would love to hear your insight.

What lender did you use for the Refi?

What type of rehab did you do?

What were some of your biggest challenges?

Mark Hughes · Answer

@Domenick Booker-Pomata I completed a BRRRR on a 4plex. Purchased in cash at auction the summer of 2018 for $110k. Windows broken and boarded up. Squatters has broken into all 4 units and pulled out plumbing and broke walls between units. Building was condemned and had roof leaks, pulled water/electric/gas meters. All 4 units were in rough shape.

Going in my plan was to spend about $45k and 3 months and the Hope was to refi for $200k+ to pull out $145k and then rent units for $600 each, and cash flow around $500-1,000 each month and pull out my cash investment and in essence have a performing that I had only $10k-ish of my cash invested after the refi.

The renovation went pretty smooth in the beginning. All new TPO roof $10k, all new plumbing and 4 hot water heaters $10k, completely gutted all 4 kitchens $15k, 16 new windows $8K, interior paint throughout, 4 new toilets and vanities, flooring in 2 complete units.

But as w most renovations some snags and delays started. Some electrical problems with outlets not working, some rewiring needed. The zoning city inspectors were very responsive and glad we were improving building but they wanted the entire building renovated before a single unit could be rented (which makes sense, but my original plan was to renovate 2 units and then market and rent those 1/2 way through to start getting cash flow sooner while finished the last 2 units). The challenge was getting utilities to come out timely to inspect and install meters. Example: Gas company took a week plus to come out, and then found gas leak in unit. Sent contractors in and they found 3 gas leaks but then had to open up walls in those 3 places, patch gas line, then re dry wall and paint. Gas co came back out week later and still said a gas leak was there, contractors back on it. That cost a lot of time. Also ended up replacing exterior doors and lots of little things too (light fixtures, blinds, etc)

All in all was a great investment. Renovations came in around $60k after 5 months of work and was able to rent units for average of $625-$650/mo but it took a couple months to fill all units which was longer than expected before any rent came in. Waited ‘seasoning period’ of 6 months for the refi and unfortunately the appraisal came in low at 185k so I couldn’t pull out as much cash as I hoped but because the mortgage was smaller it cash flowed well each month.

I actually just re-re-financed the property again last week and appraised at $230k for a better long term i% 30yr note and was able to pull out in essence all of my remaining cash in the deal and more! So from start to finish with one extra R in my BRRRRR it was 18 months (first loan after 6 months and another loan after 18 months).

Andrew McGibbon · Answer

My story will sound a lot like yours Mark.  Thank you for the good information.  I bought my first fourplex last March so I've been doing this for less than a year.  This will be my second fourplex and they are both in the same, fairly rough area near our fairgrounds.  Louisiana and Copper area.  North of Central but South of Lomas.  My first one I bought last year were all 1 bedroom units but renting for $525 average and I purchased the property for $130,000.  Fairly new roof and didn't really need much work.  I did 1 hot water heater and a few small things to get them all rented.  Its been a great one so far in the cash flow department.

This new one is one street over from my other one I own but it is a 2 story and 2bd units.  Mine is in similar condition to how yours was.  No meters, stolen plumbing, busted windows, boarded up and condemned by the city.  I paid $134,900 for it(but I get my commission) so closer to $131,000 in actuality.  I plan on putting about $45,000 into it.  So all in, around $175,000 if Im lucky.  An appraisal at $185,000 would put me at being able to pull back out basically the purchase price so around $130,000.  I'll leave my $45,000 in it which isn't ideal, nor really a good BRRRR but the numbers should still work pretty well.  Its a little disheartening hearing you had a hard time getting $625 for nicely renovated units.  Using the numbers of $625 per unit and leaving $45,000 in the deal, with a $130,000 mortgage, my spreadsheet says I should be able to make about 14% on my money after all expenses.(not including appreciation, tax help, principal paydown, etc...)  So still a solid purchase.  I am just hoping to be able to pull more of my money out so that Im able to do this again sooner and keep looking for deals.  Thanks for the information.  Work on mine starts next week!

Andrew McGibbon · Answer

I close on a fourplex in Albuquerque on Thursday that is boarded up and condemned.  Needs a lot of work.  I got it "cheap" but not nearly as cheap as I would like.  Im not sure how well its going to work out to be honest in the BRRRR department, but that is the goal.  I plan on making videos of the entire process but that will obviously take a few months to complete.  If you give it a couple months, I can share all the data.  Let me know if you have questions in the meantime.

Andrew McGibbon · Answer

Thank you @Laura Casillas.  I am a Realtor in Albuquerque, so everything I've found so far has just been keeping an eye on MLS.  I have not done any other marketing or looking at doing anything else yet.  I may in the future, but at the moment am pretty busy running my real estate business.

Patrick Torres · Answer

@Domenick Booker-Pomata I am no expert on the matter, but I have done some research on the boarded up buildings as I too have found some that were of interest.  Many times you will see NSRES stenciled on the covering.  These dwellings are boarded up by the city to try and prevent squatters, vandalism, or other nefarious activities from taking place there.  As @Mark Hughes mentioned, these properties are generally not in foreclosure, but the city may continue to fine them for code violations which could push them in that direction.  In some circumstances the city will seek the right to demolish the properties if they are in really bad shape.  I was inteterested in one of these buildings that was eventually foreclosed on, when we contacted the agent they informed us there were over 25 offers submitted on it within the first several days.

Mark Hughes · Answer

@Andrew McGibbon sounds like a good plan! I forgot to mention I was able to collect flat water fees from 3 of the 4 tenants at $30/mo in the leases so that in essence bumped rents closer to $650. And I opted to take a couple tenants w pets in the units w tile so that was another $25/mo pet rent. I was looking for a couple section 8 tenants in there but the timing just didn’t work out. Fingers crossed for the future as that bumps it up to $750+ depending on utilities.

Andrew McGibbon · Answer

@Domenick Booker-Pomata Mountain America Credit Union based out of UT is the best lender I've found.  Right now they are under 4% rate and only 15% down on multifamily.  Crazy!  I do not self manage.

Andrew McGibbon · Answer

@Domenick Booker-Pomata I am using personal money.  Some cash saved and just did a HELOC on my house as I have about $200k in equity in it so I have a $170,000 line of credit plus my cash saved.  After the refinance, I will pay back my HELOC completely and as much of my personal money as I can get back.

My first fourplex purchase has actually been going great so far.  When I bought it, I had 1 tenanat, 2 vacant and the 4th unit had a tenant that was 2 months behind so I had to start eviction the day we closed.  We filled the 3 units within about 2 months and it has been going quite good since then.  I have minor vandalism like graffiti but nothing major yet.  Also, when I had vacant units, I had quite a bit of transients and people sleeping on the property.  Since I filled the units, I have not really had those issues.  The key is to keep people there and the problems mostly stay away.  Vacancy is what brings in the riff raff.

Laura Casillas · Answer

Great year and great job @Andrew McGibbon, do you mind if I ask how did you find the properties? Also in auction, MLS, wholesale?

Andrew McGibbon · Answer

@Domenick Booker-Pomata I am still looking at refi options as Im a couple months out.  There are several great lenders in this town.  Im looking for a portfolio lender, that will loan higher than 70% LTV and not make me wait 6 months after I purchase it to refinance it.   I have a good lead on one, but don't want to give it out until I know its legit.

Also, Im very happy with the contractor so far but its only  been a few days.  I think anyone is hesitant to give a good contractor away to people for fear of them becoming too busy for them :)  But I'd also rather not give out this until I know how it turns out.  Too early to tell at the moment.

Successful BRRRR Albuquerque?

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