LESSONS LEARNED FROM MY 3RD BRRR.

[Stephanie Cabral]

I invest in central Connecticut where the market is fairly saturated with other investors and taxes are extremely high so we have some obstacles to overcome. That being said, I just refinanced a property, completing my third BRRR in the market, leaving minimal dollars tied up in the property - I wrote the story but it was so long, so here's the stats, fun facts, and lessons learned. Sorry, it's still long!

- The property was a HUD property, single family 3/2 with full finished basement in a solid B neighborhood, that was available for bidding only by owner occupants.

- It was listed at 85k, needed about 12k in work and ARV was 140-150k.

-I saw it during the period when only owner occupants could bid so I was ready to submit an offer the very day the owner occupant period expired. (I actually didn't get the property - an owner occupant came in and bid higher. Bummer. Until a few days later when they didn't get their paperwork in right away and lost the contract and I got a very unexpected email a few days later saying my offer was accepted. Game on. LESSON LEARNED - opt to have your offer kept as an alternative if the initially accepted offer doesn't work).

-I used hard money to fund the purchase and rehab and used a private lender for the 20% down. I wasn't out of pocket anything but given the cost of money and refi costs, I know I'd be leaving a little bit in at the end of the day. LESSON LEARNED - your lender is your partner. Since this was my first time working with my lender, he asked to see my quotes and referred me to get a second quote, saving me 5k in a tile job that I wouldn't have picked up on since the quote came from a guy that's worked with both me and my parents in the past. Loyalty is brief.

- I rehabbed the property in 2 weeks and I got a great tenant right away so I never had any loan payments while the property was vacant. FAVORITE TIP - I let my tenants choose between 1 or 2 options of certain renovation items like paint colors, vanities, lights. They're all items I'll be fine with when they leave but it's a huge incentive to the tenants to let them feel like they're part of the design process and makes them more invested, treating the house like their home.

- I just put permanent financing on it. I went with a conventional 30 year loan in an LLC, my PITI is 1050, tenant pays 1600, it appraised for 143k which I think is low since the identical house next door sold for 170k (LESSON LEARNED - always be very conservative with the appraised value. I could've easily estimated it would've sold for higher but I saw one comp that I considered an outlier but thankfully still used to in my analysis to get 140-150K ARV.)

- Final numbers: I've left about 4k in the deal for a COC return (my favorite metric) at 85% and I have 35k in equity! This isn't a cash cow, but it's a base hit and good experience. I'll take it!

Now on to the next one, I close on my 4th next week. Stay tuned.

[Stephanie Cabral]

@Lance Lvovsky, I used a local bank and the LLC was a single member, single asset LLC. I understand this is rare but this is the second time I've done this with this bank.

To get the conventional, 30 year term, they qualified me and my personal DTI, factoring in my other properties as well, (odd because the other prpoerties are owned in different LLCs). Before refi, I owned the property in my name but they allow me to quit claim the property into the LLC (technically before but realistically it's simultaneous at closing) so the new owner upon refi is the LLC and the refi paperwork is all in the LLC name. I do pay a slightly higher interest rate for that strategy, but I like knowing that the bank has blessed the LLC.