This was a BRRRR deal. I purchased a 3/1 SFR at the county auction for 40,500 and invested about $16,000, paid $150.00 in attorney's fees to create an LLC. Holding costs were $1000.00 for property taxes for the second half of 2017 (taxes are paid in arrears so I paid 2nd half 2017 taxes in the 2nd half of 2018), and about $300 for utilities. All in purchase, repair, and holding costs were $57,950.

I placed a tenant January 1st at $895.00 per month. I refinanced the deal in March. Appraisal came in at $74,000. I refinanced 75% LTV @ 7.25% to get back $55,500. The bank took $6,000 in fees, closing costs, and escrow, so I walked away with $48,500 in cash, $18,500 in equity in the house, and $104.00 in monthly cash flow after PITI and 15% for capex and maintenance. Deal nets 12% cash on cash per year and grew my net worth on paper by $18,500. $48,500 cash was deployed in the same neighborhood on another BRRRR deal.

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

The unlimited exponential returns through BRRRR are very appealing. Markets are pretty hot on the MLS so deals are hard to come by unless you can offer $100,000 cash the day something is listed. I had only about $70,000 to work with all in. I have not tried direct mail so I don't get any deals that way. I like the neighborhood because competition isn't too high, my ARV was predictable, I could get solid tenants, and cash flow $100/mo worst case.

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

I purchased this at the auction so there was no negotiation. My auction process was to target a neighborhood, drive by the houses for sale, and pick one whose exterior was not too bad. I then used the MLS to estimate worst-case ARV. From there, I set a target all-in price for the auction, worked backwards from that number, and set a limit on what I bid at the auction. I went to three auctions where my target properties were bid up past what I was willing to pay before I purchased this one.

How did you finance this deal?

Cash and then refinance through a bank that would loan to an LLC.

How did you add value to the deal?

The interior was badly stained with tobacco so I paid painters to do 3 coats of interior oil-based primer and neutral gray in the other rooms. I would normally paint myself but the extent of the stains meant my time was better spent elsewhere. I also paid for the hardwood floors to be refinished and the exterior aluminum siding to be painted and repaired. I personally gutted the bathroom, re-did kitchen floors, installed appliances, fixed some plumbing, and fixed a broken downspout.

What was the outcome?

Outcome was stated above with the refinance numbers. $18,500 equity, $100/mo cash flow, $48,000 cash back on the refinance.

Lessons learned? Challenges?

I purchased the house from the auction and the previous owner was still living in it. I did cash for keys for $500 which took 1 month longer than I planned. A straight up eviction may have given me access sooner but there was a risk he would damage the house. I mistakenly started repairs before I fully gutted the house and emptied its contents. This meant I had to get a Bagster 1 month into fixing the house AFTER I had already paid for a dumpster.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I used the only lender I could find that would lend to an LLC and found some contractors I would recommend.