BRRRR- Joshua Tree Short Term Rental

[Brittny Kenaley]

Investment Info:

Single-family residence buy & hold investment in Joshua Tree.

Purchase price: $175,000
Cash invested: $50,000

We purchased this 1955 2bd/2ba home on 5 acres in Joshua Tree, CA in 2016. Jeff and I spent six months renovating the home ourselves, driving back and forth from Los Angeles to JT (about 2.5 hours each way) on our days off to work on the home. Once completed, we starting renting the home out on Airbnb, which Jeff has continued to manage ever since. We thank our lucky stars we bought this home, which has allowed us to purchase 5 others in CA. We are currently in the "what's next" phase.

What made you interested in investing in this type of deal?

At the time, we couldn't afford a home that we wanted in our Los Angeles neighborhood. We were itching to own property and had fallen in love with the idea of a desert property and owning land. In 2016, Joshua Tree was accessible ,and we found a home on 5 acres with amazing views. Our plan was to make this a short term rental, which would cover our mortgage and allow us the cash flow to still afford our rent in Los Angeles.

How did you find this deal and how did you negotiate it?

In 2016, the JT market was already ramping up. Our real estate agent warned us that we would likely have to make an offer on a home before seeing it in person. Even then, people were coming in with above asking or cash offers. For some reason this home wasn't selling & we were assuming light pollution from a near by college could be why. We visited the property at night & the views were amazing so we put an offer in the next day. We wrote the seller a kind letter asking her to pick us!

How did you finance this deal?

As a first time home buyer, I qualified for a USDA loan. This allowed us to get into the home for essentially no money down at a 3.75% interest rate. We did have to pay PMI, but when we refinanced to a conventional loan we were no longer required to have that.

How did you add value to the deal?

We did all the renovations ourselves, which allowed us to save money on labor while adding our personal touch to the home.

What was the outcome?

We have been running a successful airbnb operation ever since! We've used the cash flow from this property to pay off the debt we accrued on renovations and have been able to invest in 5 other properties in CA. In 2021, we did a cash out refi which we will likely use to build an ADU so we could have an additional short term rental on the same parcel.

Lessons learned? Challenges?

Take risks. I was very nervous to buy my first home and spent so much time stressing over whether we bought the right one. This being our first BRRRR, I would get overwhelmed at times and found it hard to make decisions on....everything, from paint colors to doorknobs. It was a waste of time and energy. Make a decision, move quickly, fix later if needed. More than likely, it won't be necessary.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Real Estate Agent- Paul Karr
Outside Loan Originator- James Allenbach at The Allenbach Group