BRRRR Success Detail Deal Analysis

[Alex Babayev]

Bought Oct 2020 today Feb 2021 (4 Months Total)completed a successful BRRRR

What’s that?! Read below

I paid $78,000 for it. Property was outdated and distressed. It needed a full revamp to bring it to 2021 standards.

New: Roof, kitchen, bathroom, flooring, appliances, HVAC, plumbing, electrical etc.

Originally the property was a 2BR 1BA however I stole some space from the living room to add an additional bedroom.

I knew I would need that additional bedroom when I went to do a refinance and the appraisal would boost my value if it was a 3BR instead of a 2BR

Total renovations cost me $40K

I got the property rented out for $1,285/month

Let’s Recap $78K purchase + $40K renovation = $118K Total all in cost + private lender costs

oh by the way I didn’t use any of my own money 💰 a private lender funded the entire purchase price for me! Oh and He agreed for me not to pay him any interest until after I refinanced the property so I had no expenses while I was in renovation mode except for the renovation costs labor and materials.

Private Lender $80,000 Loan at 10% annual interest = $666/monthly payment x 4 months I used the money = $2,666 interest I paid back to my mender so now my all in cost is $118K + $2.6K = $120,600 all in

I did a cash out refinance property appraised for $185,000 ( wow that’s $55K in instant equity 🤩)

Lender offered me up to 75% LTV $138,750 I could pull out but in order to get maximum monthly Cashflow I decided to only borrow $127,500 against the property

Now remember I am all in $120,600 and now at the closing table I am getting back $127,500

Wait a minute! I am walking away with $6900 in my pocket!! I am getting paid to own a house!! Yes ladies and gentlemen that is possible

Research BRRRR method

Buy, Repair, Rent Out, Refinance, Repeat

This is how you create infinite returns and how you own houses with $0 of your own money 💵

To summarize

Mortgage Balance $127,500

30YR Mortgage 4.37% interest

Monthly payment including Taxes & Insurance = $750

Rent $1,285 - $750 = $535 Net Cashflow in my pocket monthly

Remember I have $0 of my own money invested in the deal!

Time to go look for my next BRRRR deal! Talk soon ✌️ 🙏

[Ryan Howell]

I am convinced that there is no better way to build wealth than the BRRRR method. Nice job!

[Whitney Hutten]

@Alex Babayev Congrats! Your hustle has paid off ;)

[Alex Babayev]

@Ryan Howell #iAgree - A guaranteed proven and tried method.

@Whitney Hutten Thank you! The BRRRR journey is the true joy the end destination is quite boring if you know what I mean!

[Kurtis R.]

Great success! Is this in the ATL area?

[Chandler C.]

@Alex Babayev sounds like a very successful BRRRR deal! How were you able to cash out refi in under 6 months?

For a Freddie Mac cash out refi, I know the borrower must have been on title to the subject property for at least 6 months, hence the typical 6 month seasoning period. 

[Alex Babayev]

Originally posted by @Kurtis R.:

Great success! Is this in the ATL area?

Yes, City is called Clarkdale, GA 

[Alex Babayev]

Originally posted by @Chandler C.:

@Alex Babayev sounds like a very successful BRRRR deal! How were you able to cash out refi in under 6 months?

For a Freddie Mac cash out refi, I know the borrower must have been on title to the subject property for at least 6 months, hence the typical 6 month seasoning period. 

You are correct is using a conventional Freddie Fannie loan their is a 6 month seasoning requirement you can avoid that requirement if you search for smaller banks who do 'portfolio lending" which means they lend out their own internal funds on deals like this and are not subject to fannie and freddie guidelines. 

Also this was a secondary party lender who is not subject to those guidelines as well as they use their own funds to buy the note and then sell the note on wall street. 

[Chandler C.]

@Alex Babayev ah that makes perfect sense! Thanks for the information. I am approaching my next deal through the BRRRR method, and have been researching exit strategies.

One risk I am trying to avoid (as much as possible) is having capital tied up in a investment for too long, and the method you described mitigates that risk! 

[Catheryn Barry]

This is so inspiring, congratulations!

[Sean Lopez]

Did a quick scan of MLS properties in Clarkville and found most listings above $200K. Not a single one (except land) under $100K. Congrats on finding a purchase opportunity at $78K... and then making it work!  Inspiring

[Moshe L Cerqueira]

@Alex Babayev

Congratulations and thank you for sharing! One question I had is will you have to pay taxes because you refinanced or is there a way around that? I am new to all of this and would appreciate some guidance.

[Manda Gouvion]

I'm struggling to understanding the refinancing part (I just heard about BRRRR today). Does it mean you mortgage with a bank to pay off your lender? So you and the lender no longer have financial ties? And now you have this property with a mortgage completely independently? Being literally a couple days into real estate investment researching, I'm a little wary to get into business with someone long term or share profits especially because I don't know how that works legally.

Also a huge unknown of mine is the taxes you pay on income with real estate investing and LLC's, etc.

Basically I'm wondering a step by step financial guide. I went to school for accounting for two years before I got pregnant with my second baby and decided to discontinue college. Numbers are my jam. Love them. Hit me up with all the semantics! What's basically step 1 when you have 0 connections, 0 experience and beginner knowledge? Do I first need to make an LLC? How much should I put in that LLC like $20K?

If there's a blog or youtube video explaining absolutely beginner steps PLEASE send it my way!!

[Todd Rasmussen]

Originally posted by @Moshe L Cerqueira:

@Alex Babayev

Congratulations and thank you for sharing! One question I had is will you have to pay taxes because you refinanced or is there a way around that? I am new to all of this and would appreciate some guidance.

You don't pay taxes on the principal received when you get a loan. He'll pay taxes on the income from the property at ordinary income levels, but nothing for the refinance action.

[Todd Rasmussen]

@Alex Babayev

Disagree with describing cash flow at $535 based on the other expenses you'll incur. Looks like property taxes and insurance is impounded so even if you assume reasonable expenses I think you're still netting $200 a month or more. Very clean BRRRR. Nice work.

[Matthew Waldron]

@Alex Babayev awesome job! Very inspiring to read. Keep going 👍🏼

[Jim Piety]

@Alex Babayev great example of a clean, photographic BRRRR! Would love to see the before and after photos. My question is how did you do the rehab? How did you come across your contractor and do the design? Thanks for sharing this awesome win. Congrats!

[Ryan Cleary]

Great Job Alex!  Did you do your own marketing to find the deal?

[James Gill]

Congrats!! Thats amazing and Inspiring

[Doug Borchert]

Congrats @Alex Babayev!

I'm relatively new to real estate - recently got my first buy-and-hold but want to pivot to the BRRRR method and am considering options between self-financing or finding a private lender. How did you find your private lender for this deal? It seems like you have plenty of experience in the space, so any recommendations for someone new like me on how to find / earn the trust of private investors?

From reading the forums, it sounds like research and networking are the two keys here...

[Melissa Carlisi]

@Manda Gouvion There's a lot of people on TikTok that explain BRRRR! Some favorites of mine are, Austin Rutherford and Sam Primm. Hope this helps!

[Chris Mcdonald]

@Chandler Cartolano

Not to be a hater but this deal seems a little fluffed.

Refi before the 6 month seasoning period?

Hard money was 10% and didn’t charge interest until after project was complete?

Overall congrats but this deal seems to good to be true. If it is, you better rinse and repeat cause that was a grand slam. Tough even finding deals in my market at the moment.

[Alex Babayev]

Originally posted by @Jim Piety:

@Alex Babayev great example of a clean, photographic BRRRR! Would love to see the before and after photos. My question is how did you do the rehab? How did you come across your contractor and do the design? Thanks for sharing this awesome win. Congrats!

I have been in Atlanta market 10+ years so I have a well developed relationship with contractors. I used my own money to fund the rehab labor and materials. I design all of my properties myself. After doing over 100+ flips it comes as second nature at this point to design my properties. Follow me on insta for all my before and after photos @transformation_papi

Here is the link to before and after's

https://www.instagram.com/p/CJLe0XSjeoZ/?utm_source=ig_web_copy_link

[Alex Babayev]

Originally posted by @Ryan Cleary:

Great Job Alex!  Did you do your own marketing to find the deal?

 Hi Ryan, yes I do have a division of my business that does do direct to owner targeted campaigns  however this lead in particular came in from a real estate agent who I have bought dozens of deals with before. He gave it to me before he listed it on the market and got to make double commission on it on both sides. Once you have an established reputation for closing quickly , not backing out of deals, agents and people tend to bring you deals for the ease of the transaction. 

[Alex Babayev]

Originally posted by @Doug Borchert:

Congrats @Alex Babayev!

I'm relatively new to real estate - recently got my first buy-and-hold but want to pivot to the BRRRR method and am considering options between self-financing or finding a private lender. How did you find your private lender for this deal? It seems like you have plenty of experience in the space, so any recommendations for someone new like me on how to find / earn the trust of private investors?

From reading the forums, it sounds like research and networking are the two keys here...

 Hi Doug, I have been doing this for 10+ years, the private lenders came from years of trust and relationship building. One step I would recommend to you to gain trust and credibility is document your projects via Photo/Video and create before during and after's. This will help you gain credibility when you go and ask people for money it is awkward if you can show them what you are doing it eases that tension a bit. Check out on my website my portfolio section I would recommend doing something like this. How I Built My Portfolio Page For Private Lenders

[Alex Babayev]

Originally posted by @Chris Mcdonald:

@Chandler Cartolano

Not to be a hater but this deal seems a little fluffed.
Refi before the 6 month seasoning period

 As long as you don't get Fannie & Freddie debt their is no seasoning period requirements. Look for banks that are portfolio lenders that means they lend out there own money. Secondary markets don't have seasoning periods and if they do they are usually on 90 days lendingone.com lendinghome.com etc EDUCATE YOURSELF

Hard money was 10% and didn’t charge interest until after project was complete? I have many high net worth individuals who lend me money from 6%-12% - people who have millions of dollars sitting in the bank for example chase get 1% if I can offer them 10% secured by real estate why wouldn't they take it!? build your relationships and you will see people have more money than they know what to do with. 

Overall congrats but this deal seems to good to be true. If it is, you better rinse and repeat cause that was a grand slam. Tough even finding deals in my market at the moment. You sound like someone who has given up and is deflated. I get tons of deals weekly literally have more deals than I know what to do with. We do $75K of direct mail marketing , cold calling, text balsts, voice mail drops, etc. FMLS has deals also you just need to learn how to look for them . There are NO good deals available for sale YOU HAVE TO CREATE the GOOD deal. 

Best of luck to you on your real estate investing journey!