My Flip-Turned-BRRR Story

[Taylor Shapiro]

I'm seeing a lot of these great BRRR stories and wanted to share mine.

It was my forth deal at the time and one of my most profitable ones to date. The place had been listed on and off for over 2 years and was a complete eye sore. See for yourself...

Yes. Pink.

I just started working as a property manager for a 300 unit apartment complex and told the owners I was serious about getting into "value-add" apartment building. He told me to "prove it"... and so I did :)

I bought the quad for $72,000 and had a rehab budget of $50,000 planned. The first floor units, both single bedrooms, were occupied. Fortunately for me, the tenants were saints who paid on time and psyched that the place was getting fixed up. All I did in their units was update the bathroom vanities, toilets, mirrors, and light fixtures. 

The second floor (3/1) and third floor (2/1) were light turns consisting of all new windows, countertops, updated bathrooms, paint, refinished HW floors, and new electric and plumbing fixtures. The exterior was scraped and painted and an underground oil tank was removed. After a quick two months, the rehab was completed and for a grand total of just under $41,000! 

I set up a few showings for the second and third floor units and got them filled for $800/2br and $900/3br. The 1brs were renting for $600 each. $2,900 collected each month, $34,800 for the year. 

The original plan was to flip it. I was just getting started in REI and was more comfortable with a big check now rather than smaller checks over time but when the appraisal came back at $192,000 I knew I'd be missing out on some serious cashflow if I sold too soon. I changed my strategy and decided to hold onto the property for a year instead. I did this for three reason:

1. Long Term Capitol Gains

2. Management Experience

3. Proof of concept to my 2 investors 

The expenses came to approximately 46% of GOI, which didn't include a third party management fee. 

GOI: $34,800

Expenses: $16,097

NOI: $18,703

Had I financed the property for 75% LTV, I would've had a loan amount of $144,000 and a monthly payment of $784 ($9,408 annual P/I @ 4.3%, 25 yr amort.). Instead, we decided to park my investors money in the deal for a year, get them their 10% COC and sell at the one year mark.

$18,703 (NOI)

- $9,408   (P/I)

  $9,295 annual cashflow  $774 monthly cashflow!

Don't forget, I was all in for $113,000 between the purchase and rehab. Not only would I be cashflowing $774 a month with $0 out of my own pocket, but I would've walked from the closing table with a check for $31,000 TAX FREE!!!

Maybe I should've held onto that one after all :)