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BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Updated over 4 years ago on . Most recent reply

User Stats

31
Posts
10
Votes
Wes Waggoner
  • Real Estate Agent
  • Ocean Springs, MS
10
Votes |
31
Posts

BRRRR w/current tenants

Wes Waggoner
  • Real Estate Agent
  • Ocean Springs, MS
Posted

I'm 100% this has been asked before, but can't find the exact scenario in the search. Looking at a 4plex (distressed seller) that cash flows very well the way it is with the current under-market-value rents. 3 of the 4 units have tenants. The vacant unit will need around $3-5K of rehab which should easily move the rent up ~20% (from $650 to $775-$800/mo). I could do a traditional rental purchase and finance right away, but that'll tie up ~$60K of capital. Preferably, I would pay cash, rehab all of the units, then get a lender to finance ~75% LTV which would get most of my capital back. I've only seen the one vacant unit, but I have to imagine it is the worst of the 4. Primarily the rehab would be pulling up carpets, installing LVP, paint, and potentially replacing kitchen countertops. 1) Suck it up and finance now, then refinance again at a later time after all units have been vacated--ties up capital for at least the length of the leases? 2) Pay cash, wait for leases to come up (<12 months), then non-renew/force move in order to rehab? 3) Try to get it all done at one time (ask the tenants to move their stuff out of the way temporarily and/or compensate them to stay at a hotel for 2 nights)? Appreciate any advice/wisdom,

  • Wes Waggoner
  • Most Popular Reply

    User Stats

    217
    Posts
    173
    Votes
    Andre Taylor
    • Rental Property Investor
    • Chicago, IL
    173
    Votes |
    217
    Posts
    Andre Taylor
    • Rental Property Investor
    • Chicago, IL
    Replied

    If you finance the property the lender may require you a season period from 6 months to a year before they do a cash out refi..so ask around with lenders. So say if its 6 months... then I would go to improve the units over that course of time. Now with the tenants... I would sit them down and inform them about the updates and what the new rent will be...now they could be okay with that or not okay.. if they are not okay then allow them to get out their lease to move so you can get in right away, update the units and find tenants that have no problem paying the $800. Now if the tenants are okay with the rent increase if you are doing a cosmetic update.. I would give myself more then 2 nights to turn a unit over.. especially if they been in those units for years and honestly you would want all their stuff out the unit when you do the updates.. just makes it easier...but those my thoughts... good job on finding the deal.

  • Andre Taylor
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