Taking on a Big BRRRR

[Karissa Sampson]

So far on doors 1-5 its been mostly cosmetic rehabs (paint, light fixtures, appliances, sinks, counters, cabinets, flooring) without significant structural changes. Decided to do a single family to triplex conversion this time. The city code and property zoning allows for it and I have already discussed the initial conversion plans with the zoning department who, as long as permits are pulled and its built to code, have given the green light to proceed verbally and via email. We just went under contract on an appropriate property after failing to get a property of any type (SFR or multi) under contract for the past 6 months.

Property: 

Colorado

Contracted purchase price: $471,000

Single family home 2,800 sqFt

Brick ranch. 1400sqft up/1400 down. 2 car attached 450 sqft garage. Nearly 0.25 acre corner lot on quiet street with bike lane and alley access along the back of the property. Surrounded by single family homes and 1-2 blocks away are some small multifamily that are well kept. Nice neighborhood, I would run outside at night alone as a female. Kids playing basketball in the cul-de-sac. Nicely kept yards. Yet...R-MN zoning which allows for SFH, multifamily, apartments, condos, townhomes, co-ops, commercial, retail, mixed retail/residential; literally the most liberal designation out there without many restrictions. Zoning map updated in 2018-city doesn't plan to change it for a long time.

1973. Single owner since it was built. He passed away several months ago and this was an estate sale. Found on MLS. He took care of the property but its very dated. Not destroyed or damaged though. Solid bones. Has a dated (boiler/baseboard) HVAC system (no ductwork, but enough copper piping to sink a ship) and old solar panels but no aluminum wiring, the hydro pipes are copper, drains are cast iron. Inspection in 2 days.

The property works as a BRRRR and a flip. Planning to BRRR and hold long term.

As a SFH flip, comps are going for $650-700k

As a conversion to duplex or triplex, comps are going for $750-825k in un-renovated (sometimes nasty) condition.

ARR (After repair rent) for triplex conservatively $5,100/month (3:2/3:1/1:1)

We have not undertaken a BRRRR this large yet but my partner/fiancé works construction and his GC and subcontractors are onboard to allow us to do most of the work then review and sign off on it. We have jobs that allow us 1.25 FTE time to work on it. We have $200k cash to close the deal and rehab it.

Do you all have any advice for converting a SFH into duplex or triplex? I see a lot of this type of BRRRR happening in Canada but would love comments from those who have done this in the states.

What did you wish you knew going into a big BRRRR? What would you have done differently? What took the longest time or cost more money than you anticipated? Any savings (time or money) tips?

Very excited to take on a large project but also very aware of how it could get out of hand and we could lose money.