First BRRR completed in Milwaukee, WI - NO MONEY DOWN

[Kyle Mack]

Hey Biggerpockets! I wanted to share my BRRR project and how the numbers worked out.

At the beginning of the year, based on a hotter multi-family market, I switched gears to focus solely on foreclosed duplexes. Starting on the MLS, I looked at duplexes that needed under $10,000 in rehab work in B-/C+ neighborhoods.

As a full-time occupation, I am a commercial real estate professional. Although I am licensed and have MLS credentials, I have found it makes the most sense to have a trusted broker (@Michael Henry), to walk the properties with me, provide his opinion/feedback, and write my offers for me. After 2-3 showings per week for about 2 months, I found a 3/2 BR upper/lower duplex that showed promise.

Mike has completed and advised on many rehab/rental projects and his expertise was helpful in making a decision. Primarily, the rehab work was cosmetic, but including finishing off a bathroom. The rehab cost was estimated at $5,700. I put in an offer of $55,000, which was slightly over asking price, due to multiple offers. I estimated the ARV to be right around $100,000 (60.7% LTV).

Concerning financing, I had partnered up with another partner, who provided the down-payment. In order to remain flexible, I approached a local hard money lender, who funded 65% of the ARV. With this structure, I was able to purchase the building for NO MONEY DOWN.

I closed on the property on 3/27/17, and the rehab timeframe was roughly one month. Also, during this time, I found a local credit union who could refinance me out of the hard money for up to 80% LTV with NO SEASONING PERIOD for the full appraisal value.

Once the rehab work was completed, we immediately began to show the duplex to potential tenants. The duplex was marketed for $775 for the 2 br and $875 for the 3 br ($1650/mo total). With maintenance reserves, CAPEX, insurance, taxes, utilities, and a vacancy factor, the cash-flow is $425/month.

For me, the cool thing was be able to refinance and walk away with cash for a deal that I put absolutely no money into! The property appraised for $101,000 and I was able to refinance at 80% ($80,800). Therefore, at closing, after paying back my "down-payment" partner and making a few hard money payments and fees, I was able to walk away with a check for $10,600.

The even better news is that I have 6 more of these BRRR projects in the pipeline (2 in the rehab phase, 1 closes tomorrow, and 3 are pending to close). More posts to come!!