First Investment Using BRRR

[Derrick Lloyd]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $19,000
Cash invested: $33,100

SFR home bought in St Louis with intent of using BRRR method. House is a 3 bed/2 bath about 930 sq ft. House needs significant renovations, but mostly cosmetic. Purchase and rehab funded using a HELOC.

What made you interested in investing in this type of deal?

I have been targeting deals that work with the BRRR method, and my criteria is the following:
- Purchase and rehab must be less than HELOC credit of $65000.
- 75% of ARV of property must be greater than purchase, closing costs and rehab. This is so I can refinance to a 30 year loan and pay off the entire HELOC.
- Properties must cash flow at least $50 a month after refinance using conservative numbers for expenses.
- Property located in a C or greater neighborhood

How did you find this deal and how did you negotiate it?

I have an agent in St Louis who understands my criteria and sends me properties he thinks will work. This was a REO that we got for well under their asking. Not much negotiation, we just put in a low offer that was accepted. We asked for a $3500 price reduction after the sewer inspection due to sewer repairs, but we only got $1000. Anything is better than nothing in my book!

How did you finance this deal?

HELOC

How did you add value to the deal?

REHAB!!! Major rehab working including new floors everywhere, new paint interior and exterior, updated bathrooms, new appliances, etc.

What was the outcome?

TBD, this project is still in work! Hopefully I can give a successful update instead of a "don't do what Derrick did"

Lessons learned? Challenges?

Always get a sewer inspection! Would not have known sewer needed repairs.

[Amanda G.]

Congrats on having specific criteria, it makes it so much easier for an agent to help you. Hope the project goes as smoothly as possible!

[Kyle Shankin]

@Derrick Lloyd

Congrats, don't forget to post an update!

[Shavar G.]

Thanks for sharing your experience.  Could you speak to your method for estimating rehab costs while analyzing the deal?

[Derrick Lloyd]

@Shavar G. Good question.  I talked to a few real estate agents in St Louis before I picked the one I'm working with.  The reason I chose him was because he has the ability to go into the properties and estimate the work done and the cost.  He was pretty close overall minus some unexpected sewer repairs, which nobody could have known about.  The company he works for has a construction company as well, so they are experienced with rehabs.

[Shavar G.]

Good post.  Thanks Derrick

[Drew Solidum]

Congrats and good luck completing the project!

[Bryson Cox]

Thanks for the story...keep us updated on how it all progresses! Best of luck!

[David Pham]

Congrats! I live an invest in St. Louis. I would agree to always get a sewer inspection, especially in the City of St. Louis.

[Nicole Harmon]

Congrats and thank you for sharing!

-Keep us updated!

[Derrick Lloyd]

@Blake Edwards here is my write up on the property.

[Keith Shadle]

Great story Derrick. My criteria are very much the same as well, with HELOC and investing out of state from SD. Just got my first one under contract (looking for # 2) and need to start updates/rehab.

Is there another link to your writeup?  Can't view it here.

[Jonathan Newsome]

@Derrick Lloyd

Hi Derrick, is there an update on the property?

[Derrick Lloyd]

@Jonathan Newsome The rehabs are taking much longer than expected.  I had a property inspector look at it after, and there were several things I requested fixed before I send the final installment.  These have been taking a while.  But the property looks great!  Definitely a big turn around.  Right now it is listed for sale on several locations. Hoping to get someone on lease in 1-2 weeks.

[Derrick Lloyd]

Another update.  Finally got the property leased.  It took about 2 months before people applied, which was much longer than expected.  I requested the rent be lowered by $50.  My property manager didn't update the ads, but I think one of his employees told applicants over the phone that it was $900 instead of $950.  A tenant got accepted in June and is moving in this month!  Now I am working on the refinance portion.

[Matt Abrams]

Derrick, thank you for this awesome write up. I learned a lot and feel more confident with my investing. Send more updates, I wish you luck!