HOW I GET PAID to buy real estate - A BRRRR Deep Dive

[Chris Niemeyer]

(Posted this on my FB and got a lot of traction so figured this awesome community may like the deep dive elements of my recent BRRRR deal.)

A closer look at HOW I GET PAID to buy real estate. (Real numbers on a real deal...since you're asking.) Many friends recently have asked about this real estate journey and how I'm doing it. They want an actual deal scenario. So here you go!

I purchased this off-market duplex from a wholesaler. (I'm on public record as a cash investor so get hit up by wholesalers almost daily now. Good and yet sometimes annoying.)The property was in poor condition. Not finance-able by traditional lenders. I aim to buy the worst house on the block in a good neighborhood.

I like making TRASH turn into CASH. So I used a hard money lender I have a credit line with. They will finance deals for experienced real estate investors.

I put 10% down for purchase, they fund the rest plus 100% of the rehab budget (this is key on bigger rehabs).

Purchase price: $82,000

Closing costs: $2500

Holding costs and interest during rehab: ~$4500

Rehab budget: $35,000

ALL-IN: $125K

Next, toward end of completion I reached out to the local credit union I use to have them inspect, appraise and start a cash-out refi process. This was done and they came back with an appraisal ARV of $190,000.

So I accepted a cash out refi for 80% loan to value on a 3.75% 15yr fixed term - $152k cash out.

Meaning...

They wrote me a check, I paid off the hard money loan, past expenses to hold, etc - and put ~$25k in my pocket! Tax free. I'll use that money for the next deals.

It gets better.

That duplex will rent for $2100/mo and my mortgage PITI is ~$1350. More cash in my pocket each month to grow and do more deals.

Plus:

Tenants are paying down the mortgage each month

I get ongoing property appreciation

The great tax benefits of depreciating the asset over time

If any of this sounds good to you, doesn't make sense, want more answers or next steps just let me know! Hope this helps someone. 

It's action, not information, that wins. That's the key to building wealth. Go get 'em!

@chrisniemeyer

[Clay Boykin]

@Chris Niemeyer This is very similar in the Columbus market. The ARV for a BRRRR is staying around 70% which is pretty solid. Cash buyers are capitalizing heavily on their income these past few years. Being in wholesale real estate, I see plenty of this. People want to either house-hack, BRRRR, or just a quick flip. As you, I personally use hard money lenders as well. The rates are clearly better and using little cash as possible to maintain that ARV is definitely necessary. I have ran into lenders that actually fund up to 95% of the purchase price, enabling the buyer to maximize their cash on cash return. This is one of the best processes right now when it comes to flipping and it's only going to get smoother. Feel free to reach out to me to talk real estate! Either way, Have a good day!