3 succesful deals in the last 12 months

[Jose Bernard]

Hello Bigger pockets world! I’m excited to share what I have done since joining bigger pockets last year; and more importantly thank bigger pockets and all the members for your motivation, knowledge and resources. 

I was introduced to Biggerpockets last October. Since then I established and run an investment company based out of New Haven Connecticut. We focus on purchasing multifamily properties, renovating them, renting them and managing them for monthly cash flow. In the last 12 months, I purchased 2 properties (a duplex and triples) in Hamden CT; and will be closing on another triplex next week. The properties are cash flowing over my initial expectations based on my analysis, which is very reinforcing to see.

I will post pictures and details on the new triplex after closing.

[Jose Bernard]

Sure, I'll start with the background of the deal and then discussed the specific numbers in regards to the triplex I purchased last October.

The property was an REO in a B+ neighborhood. It needed a renovation and new mechanicals. The property consisted of two 3 bedroom units and a one bedroom studio. It was priced at $175K and I got it for $160k. I was able to include the renovation for $45k in the loan as well. Part of the renovation was changing the floor plan of one of the units and turning it from a 3bedroom to a 4 bedroom.

The down payment for the financing was 25%. The taxes on the property are $6,792.00, and insurance premium is $1560.00. I use a conservative approach to my financial analysis. I estimated going over the renovation budget by $10k, I estimated a 5% monthly repair and maintenance even though everything in the property was going to be new, I still keep 6% for capital expense, I use a 15% vacancy rate, I estimated the sewer and water bill to be $550.00 every 3 months, and I estimated the rents to be 10% below market rents ($1,300-$1,450- $500). Based on this numbers the Cash on Cash return would have been 11.74%, and the monthly cash flow $685.00.

The renovation took 4 months, which knowing what I know now took longer than it should. The main reason was learning to manage the GC and preparing time and resources for the unexpected, but being my first total rehab I look at it as a great learning experience. I only went over budget for $8k instead of the $10k I had budgeted for. 

Fast forwarding 6 months later. The property started cash flowing April 1st. I established a property management company in an LLC and did all the showings and screenings through the company. Currently the rents are: $1,450 for the 3 bedroom, $1,600 for the 4 bedroom and $550.00 for the studio. The maintenance in the property has average out to be 2.5% for landscaping services. The sewer and water bill for the last 6 months have average out to be $420.00 every 3 months. The monthly cash flow is currently $1,034.00. Including my holding cost during the renovation and the time the property was vacant if we continue to cash flow the way we have been for the last 6 months the Cash on cash return for the first year will be 17%.

I have a great relationship with the lender (prime lending), and since the last year have established new relationships with smaller lenders. As of now I'm getting ready to refinance or acquire a Heloc on the house once the 12 months hit in a couple of weeks. In prepration I had the home appraised, and the current value is $228k . Excited to try the Brrrr strategy for the first time.