First BRRR Project-Doubled Value (Photos Included)

[Jay K.]

Hey folks, my name is Jay; I'm 24 years old and I decided to take a plunge into a BRRR project as I have a large network of tradesman, industry mentors, and surplus liquid.

In November 2017 I made a bold move of buying a home that investors conceived as a pile of dung. The home sat for 5 years until it was bought by myself from a wholesaler who was located several states away from the subject property. On top of that, they conducted business with an AOL email address. Sketchy, right? The transaction went through well and I was blessed to have a property with tons of upside potential in a soaring market. Closing cost only ran me $956.00 with title policy.

Fast forward three months (March 2018), I have a fully rehabbed home, rented out, and refinanced(HELOC).

Check out the stats and give me your critical feedback. I encourage all suggestions, negative and positive!

Home Facts: 

• Beds: 4 
• Bathrooms: 2 
• Sq.Feet: 1542 
• Year Built: 1956 
• Rehabbed: 2018 
• Rent: $1500.00/mo

Financials (all cash, no financing): 

• Purchase Price: $28,155.40 
• Rehab Cost: $30,605.81 
• Holding Cost: $1,308.00 
• Total Cost: $60,069.21

Refinance (HELOC):

• Appraisal: $139,600.00 
• Line of Credit: $100,000.00 
• Equity: $39,600.00 
• IR: 5.35% 
• Loan Cost: $1280.00

I have read many BRRR stories, but I'm not sure if I just got really lucky, have a really good cost on labor, or a combination of both. I'll let the responses answer my own questions.

If you have any questions, I encourage you to ask away. 

Together, our mind will triumph.

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AFTER

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[Jay K.]

@Benjamin Seibert Thank you! HELOC's vary bank-by-bank and market-to-market just like every other loan. I did an extensive research on this forum for HELOC's as well as conversed with several lending professionals and learned that it really does vary, but once you find a good lender that also offers favorable terms, stick with them!

For me, my bank allowed me to do a 80% LTV leaving me with only having to keep 20% in the deal. I have seen banks go as high as 85%. 70% is on the lower end of the scale. Based on your supplied information & appraisal, I don't think you increased the value of the house enough to be able to pump money out of the property with a 70% LTV; On $80,000, you would be forced to keep $24,000 in the deal. I would like for someone to chime in if they have other suggestions.

My HELOC was done on a cash property with no mortgage. I suggest you speak to your lenders Loan Specialist and run your numbers by them especially if you are complete with the project and have a lender approved appraisal.

@Jon Crosby I appreciate your motivating statement. 

The reason I opted for the line of credit over a traditional refi/mortgage is solely due to me seeking an interest only loan so I can compound my capital at a greater rate. I do want to bring up the fact that you mentioned "fixed interest mortgage," just to clear things up, my HELOC is also fixed interest. I have no desire to ever get myself into an ARM!

Another reason I opted for a HELOC is because I am only to pay interest on the drawn amount of my line. Therefore if I pull $40K out of my $100K line to acquire a new asset, I am only paying interest on that $40K, not the entire $100K. In addition, I am given flexibility and control knowing I have access to cash when I need it and not having to pay on it until it is being utilized. This also helps keep my monthly payment commitment at a much lower risk.

@Matt P. I am pleased to hear about your successful deal! I try to preach to everyone that not every deal is a good deal and everyone has a different meaning of a "good deal." You have to be on the hunt. Good deals are hard to find, but when you find one it's important to jump on it and capitalize, if not, you will find yourself investing your money and time into something that doesn't give an exciting return. What's the point? Patience is important and cash is also just as important!