Another Awesome BRRR Project Completed!

[Benjamin Riehle]

Hey Bigger Pockets! Just wanted to share a recent remodel project we completed and how the numbers worked out for us!

The appraisal just came in for a recent BRRR we undertook. The property was valued at $138k.

We began this project back in March of this year, purchasing a run down home in Tucson’s Barrio Hollywood neighborhood for $60k cash. We poured $53k in the project, carrying out a 3-month remodel, and arrived at an updated 4B/2BA, 1296 sqft home. The place was rented out within the first week at $1,100/month! That comes out to a cap rate of nearly 8.2%.

And yet, as we know, with the BRRR strategy our primary concern is the ability to return our capital and minimize our total capital outlay and maximize our equity gains.The fact that we have such great rental return is just icing on the cake!

After rehabbing and renting, our next step is to refinance. We will refinance with a conventional mortgage at 80% LTV (loan to value), putting $110,500 back into our pocket.

Herein lies the compounding potential of the BRRR strategy. After putting $113k in, we are getting the $110.5k back, nearly negating the amount of capital tied up in the project. Now the property is cash-flowing, we have $25k equity in the property, and we have the refinanced sum of $110.5k to go repeat the process. Gotta love BRRR!

If you haven't already, go read Brandon Turner's comprehensive blog post on the BRRR strategy:

https://www.biggerpockets.com/renewsblog/2015/04/2...

Hope everyone has a great weekend!

[Benjamin Riehle]

Hey @Bud Dwyer I have to echo what @Cody L. said. Always going to be "What ifs" however, our investment strategy is designed to offer an additional layer of protection if the market does take a turn. 

You are correct property values in Phoenix have drastically appreciated over the last year, Tucson seems to be following a similar trend. I have written a few articles on why I believe this rapid growth in AZ is occurring. 

As for the fear of prices dropping, with a 80% LTV we have 20% equity protection, meaning the market would have to drop more than 20% before we are under water. We invest in under-capitalized neighborhoods that have substantial upside appreciation potential due to attractive locations. As a result, we feel we have an additional layer of protection from a shift in the market given the demand for the areas we are investing and the current under priced micro-market.

As for rent drops, the investment strategy of under capitalized neighborhoods provides that additional layer of protection from drastic rent drops. 

As with any type of investing, there are going to be risks. The key is minimizing the risk by maintaining multiple exit strategies and holding options. 

Feel free to reach out any time to discuss in more detail. Have a great day and thank you for commenting on my post!