Finding Deals - Strategies

BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Finding Deals - Strategies

Drew Steusloff
Developer · Atlanta GA · Member since 2020 · 30 posts · 15 votes

Hi BP community,

After spending significant time educating myself and saving for a down payment, I am ready to take action and move towards my first deal. I have been scouring Mashvisor and working with an agent to try and find properties that will cashflow. Primarily my search parameters are based on two strategies, House Hack, BRRRR, or the rare option that something can be rented immediately. My focus has been on single family homes in the Atlanta market. However, I have not seen anything that offers significant cash flow at my price point. I'm working with an all in budget of 300k and roughly a 10 percent down payment, but do have some room to increase if there is a deal that makes sense.

So far I have yet to see property listed that will meet the 1% rule and very few with a Cap Rate above 6%. I have widened my market to essentially the entire Metro Atlanta Area within the I-285 Perimeter, but this has done little improve my results. I have also looked into the suburbs, but have not seen anything that is significantly stronger of a deal. Additionally, I still feel that long term my current farm area will be a better investment, but I do not want to bank on appreciation. 

One thought I had was to perhaps put together a direct mail campaign to try and source deals, but my hesitation is that I am currently working with a conventional lender and do not have money on hand for cash deals which I feel are more typical in off market transactions. 

I would greatly appreciate anyone's thoughts or recommendations

-Drew

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Brenden MitchumBusiness Member
Rental Property Investor · Atlanta, GA · Member since 2019 · 1k+ posts · 872 votes
6y

@Drew Steusloff

@Account Closed is absolutely correct. If you really want to find home run deals, the MLS is not the place to look at this point in the cycle. But don't worry about not being able to finance those deals. Instead, ask yourself how you can. Peter mentioned just two of many creative strategies. Then when you find someone who is open to selling you can provide them with multiple options.

However, don't discount on-market deals entirely. House hacking is still a viable strategy there. Small MF, while slowing down, is still pretty hot and difficult to house hack successfully. However, there are a number of SFHs that have potential, namely the ones with mother-in-law suites and other additions. That being said, now is not the best time to look for roommates to share common spaces with so that is something else to think about. I am also seeing some potential BRRRR deals on-market. The problem with these is that third "R." Lenders are really tightening up refinancing right now, plus know one really has a good idea of where the market is going to be in 6-12 months when you're looking to get that refi. With so much uncertainty around refinancing, I'd recommend tightening up your criteria for BRRRRs and accounting for this uncertainty. Also, start a line of communication with your lender(s) now, if you have not already, regarding refinancing.

I know we already got a little chat going, but I'd be happy to discuss these topics too with you if you'd like.  

[email protected]404-737-0018
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  • Brenden MitchumBusiness Member
    Rental Property Investor · Atlanta, GA · Member since 2019 · 1k+ posts · 872 votes
    6y

    @Drew Steusloff

    @Account Closed is absolutely correct. If you really want to find home run deals, the MLS is not the place to look at this point in the cycle. But don't worry about not being able to finance those deals. Instead, ask yourself how you can. Peter mentioned just two of many creative strategies. Then when you find someone who is open to selling you can provide them with multiple options.

    However, don't discount on-market deals entirely. House hacking is still a viable strategy there. Small MF, while slowing down, is still pretty hot and difficult to house hack successfully. However, there are a number of SFHs that have potential, namely the ones with mother-in-law suites and other additions. That being said, now is not the best time to look for roommates to share common spaces with so that is something else to think about. I am also seeing some potential BRRRR deals on-market. The problem with these is that third "R." Lenders are really tightening up refinancing right now, plus know one really has a good idea of where the market is going to be in 6-12 months when you're looking to get that refi. With so much uncertainty around refinancing, I'd recommend tightening up your criteria for BRRRRs and accounting for this uncertainty. Also, start a line of communication with your lender(s) now, if you have not already, regarding refinancing.

    I know we already got a little chat going, but I'd be happy to discuss these topics too with you if you'd like.  

    [email protected]404-737-0018
    3Reply
  • Whitney HuttenPro Member
    Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    @Drew Steusloff Here is this guide on how to put together a lead funnel.  Direct mailer is pretty far down the list.  Let me know what Q's you have!

    Podcast Guest on Show How to Build Generational Wealth Without Losing it Along the Way
    2Reply
  • Drew Steusloff
    OP
    Developer · Atlanta GA · Member since 2020 · 30 posts · 15 votes
    6y

    Thanks for the feedback @Account Closed, 

    I've read a few articles on Subject to and Wraps, interesting concept. I recall hearing about this a few times on the podcasts. A few questions about this, Subject to and Wraps seem to be a good option for a seller that is looking to collect a passive income stream and perhaps already has another place to live. However, the Areas in Atlanta I am looking to invest are West End, Westview, Grove Park, Mozley Park. Near the beltline extension and Bellwood Quarry development. To me it seems unlikely that the residents area would be willing to do a subject to without any cash in hand to relocate to a new primary residence. The scenario, I would see this working in is an absentee landlord or inherited situation. I guess the only way to know for sure is to begin the direct marketing campaign. Regarding the wrap, do you think a conventional lender would be open to something like this, or would I need to look into for private money / hard money. I am currently having conversations with a lender that will work with me on Home improvement loans giving me some options on improving distressed properties, but I will need to ask if they have ability to do wraps. Also in my reading the common concern that comes up is the due on sale clause that may be activated in wrap situation. Is there any key things to look for in order to avoid this? 

    0Reply
  • Drew Steusloff
    OP
    Developer · Atlanta GA · Member since 2020 · 30 posts · 15 votes
    6y

    @Brenden Mitchum

    That's an excellent point about House Hacking and shared spaces. In this climate it is definitely a concern. You mentioned in your post that Refinancing is becoming more difficult, so far the lender I have discussed this with has had a fairly positive reaction. Are you thinking that this is just a trend due to the COVID outbreak, or is there other underlying issues?

    0Reply
  • Brenden MitchumBusiness Member
    Rental Property Investor · Atlanta, GA · Member since 2019 · 1k+ posts · 872 votes
    6y

    @Drew Steusloff

    As long as you're confident in your lender then just make sure you keep that line of communication open throughout the process. 

    The current issues in the mortgage market are systemic but have been amplified by the pandemic. I am definitely not an expert on the topic so will not speak to the specifics but @Mitch Messer has a great discussion on the subject. I encourage you to read through the link he posted there. It gives a nice overview of what is happening behind the scenes in the lending world. Essentially, everyone and their mother wants to refinance right now, yet servicers are really slowing down on buying up loans. Therefore, there are discrepancies between the interest rate and how many people are actually able to lock in a refi. 

    My lender has advised me that things are changing in the lending world daily so there is no way to know what it will look like in 6-12 months. So again, not a reason to sit on your hands and do nothing but this uncertainty should definitely be factored into your calculations. 

    [email protected]404-737-0018
    1Reply
  • Jingru Sui
    Real Estate Agent · Atlanta, GA · Member since 2014 · 683 posts · 317 votes
    6y

    I personally have found all my properties on FMLS but i'm OTP tho. My properties are around the 180K valuation. I put down 20-25% and try to hit a rent range of 1350-1450. I did all the management and my husband did some repairs. So far they have been cash flow pretty well. Most of the properties I help my investor buyers got are hitting 0.8%. We can do minimum rehab, like new paint and floor. I personally do not like run down/burn down properties that shown plumbing issues when i'm working with limited budget. My goal is usually find some thing either rent ready or might need at most a month to fix then I can rent it out quickly and start cash flowing... Just my 2 cents

    0Reply
  • Jennifer D.
    Investor · LA - Honolulu - Reno - Atlanta - Melbourne (Australia) · Member since 2020 · 35 posts · 11 votes
    6y

    @Drew Steusloff, I own Belt Line-adjacent properties in Washington Park, and I could identify a few doors you could knock on where the owners have inherited the property and might be looking for an exit.  We should chat.

    We might be able to help feed deals to each other.  I am also looking for my next deal in the Mozely Park / Grove Park / Westside Quarry area.  I think there are tons, but I am not in a position to go knocking.

    0Reply
  • Adah N.
    Investor · Atlanta, GA · Member since 2020 · 294 posts · 142 votes
    6y

    @Jennifer D.

    How are property values holding up in the Washington Park and SW Beltline parts of Atlanta? How safe are the neighborhoods? I see lots of rehabs and new construction by private investors, what deliberate efforts and plans are ongoing by the city to improve that part of Atlanta?

    0Reply
  • Jennifer D.
    Investor · LA - Honolulu - Reno - Atlanta - Melbourne (Australia) · Member since 2020 · 35 posts · 11 votes
    6y

    @Adah N., I haven't been watching property values because we are not selling.  We've had no shortage of interest in renting our Washington Park property, though the person we selected ghosted us at the lease signing phase, so we've gone back to our waitlist.  That was frustrating for me and hubby, but our property manager (who usually works in the richer northern parts of Atlanta), was not even phased by it.  She just started calling down the list.

    There are tons of rehabs in our area.  Safety is still a problem.  I once rode my bike through a live gun fight.  Well, technically, it wasn't a fight because there was only one shooter.  Still, that was pretty much as scared as I've ever been.  

    Largely, though, WashPo is one of my favorite all-time neighborghoods.  I've learned a lot living there.  I've met people I would likely not have met.  There is a vibrant history that we've been able to learn, and there are a lot of side hustles and entrepreneurship.  For investors in transitioning neighborhoods, I find that quiet streets are safer than the main throughfares, and knowing the neighbors matters.  

    The City seems to have lots of plans for the West Side.  The Belt Line is paved, there are artworks and great landscaping along it, and the parks are being maintained.  We've just had a massive stormwater management program as part of the federal water consent decree, and all around us (though not WashPo) is a federal Opportunity Zone (great tax savings similar to a 1031 exchange but without some of the restrictions; Google it).

    Happy to discuss anytime.

    0Reply
  • Mark H. Porter
    Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
    6y

    It’s quite different up here and I started out differently.  Bought a 3x, moved in one, added an accessory unit above the garage that I moved into, then just started down the path of refinancing and buying fourplexes, always fourplexes.  That’s fannies max under residential mortgages and therefore spreads the risk more while keeping conventional.  They’re all gone now having 1031’d out of them but it led to 60+ doors.

    0Reply
  • Trey Bonner
    Investor · Atlanta, GA · Member since 2019 · 25 posts · 4 votes
    6y

    Hi @Jennifer D. I live in Westview ATL and actively looking for a property (preferable 2-4 doors) in Washington Park. I agree with you 100%. The city is investing heavy in the area, there are multiple parks in the neighborhood, proximity to Midtown/downtown and the stadiums are great. Not to mention MARTA access and being positioned on the beltline. I would love to chat about any owners who inherited property or just interested in selling in the area. I am sending you a PM now. Hope we get a chance to connect.

    0Reply
  • Mike D.
    Investor · Marion, IA · Member since 2010 · 177 posts · 117 votes
    6y

    @Drew Steusloff

    I've had some luck on the MLS by targeting properties that have been on the MLS for a while. At least a few months.

    It's usually overpriced or theres some issue with it that makes it hard to show.

    And make your offer and work directly with the listing agent as they will be more motivated to get the deal done. And have more info on the sellers situation.

    0Reply
  • Alyssa Dyer
    Rental Property Investor · Oklahoma City, OK · Member since 2017 · 1k+ posts · 694 votes
    6y

    @Drew Steusloff what appreciation rate are you hoping for/has the area seen over the last few years? 

    0Reply
  • Drew Steusloff
    OP
    Developer · Atlanta GA · Member since 2020 · 30 posts · 15 votes
    6y

    Hi @Jennifer D.

    I have not looked into Washington Park or the adjacent Bankhead and English Avenue areas, largely due to concern of finding reliable renters and overall safety of the areas. You mention that you have received a lot of interest in your property, but how have the tenants been overall? Are they paying rent on time or have you had to go through any evictions?  I would definitely be interested in hearing more about the financials, as that seems biggest hurdle for me right now. 

    Thanks,

    0Reply
  • Jennifer D.
    Investor · LA - Honolulu - Reno - Atlanta - Melbourne (Australia) · Member since 2020 · 35 posts · 11 votes
    6y

    @Drew Steusloff, we have so far not had tenants in our Washington Park properties, except for a roommate who was a management consultant and always paid on time.  She moved out to get her own place.  

    The people applying are a mix. There have been some young professionals looking to downscale from their $1500-per-month midtown apartments, some Section 8s (our PM doesn't like managing Sections 8s, so we haven't gone to that space), and some older people looking to live near family.  So far, I don't think there have been many families with children.

    I don't know yet whether we will get it rented by our target, 10 May.  Feel free to check in later to see if we've achieved that.

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