Real Estate Deal Analysis & Advice
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated about 5 years ago, 10/09/2019
First BRRR; Final numbers
Hi all,
Wanted to share my first deal. I did the BRRR method
Purchase Price: $92,000
Rehab: $35,000
ARV/final appraisal: $175,000
Doing a cash out refinance and was able to get 75% of the ARV. Since I only needed the house to appraise for around $169,000, I was able to pull all of my cash out that I originally invested and pocket some extra $$.
**Double bonus - the house is in an opportunity zone so we plan on keeping it for at least 10 years so we can get the tax benefits when we sale.
That's fantastic! Did you pay cash for the property so there was no seasoning period for the cash out financing?
Originally posted by @Eric Beck:
That's fantastic! Did you pay cash for the property so there was no seasoning period for the cash out financing?
Yeah we paid all cash for it! Wish we could have bought more properties but we were pressed for time trying to do a 1031 exchange. So we put the funds in an opportunity funds and purchased this house and used the remaining funds to rehab
Awesome job!
I think there's a seasoning period of 6-12 months (with most lenders) regardless of how you purchase the property. You can delay finance to access cash but only to the purchase amount or wait and cash-out based on the ARV. Someone comment if I'm wrong.
Originally posted by @Jaron Walling:
I think there's a seasoning period of 6-12 months (with most lenders) regardless of how you purchase the property. You can delay finance to access cash but only to the purchase amount or wait and cash-out based on the ARV. Someone comment if I'm wrong.
The season period was 6 months before we refinanced
Awesome Job! Can you explain more detail about the opportunity fund? We are trying to do 1031 exchange as well. Thanks
@Jaron Walling That's what I have always understood as well. Doesn't this create a pretty big issue for the basis of the BRRRR method?
Originally posted by @Mike C.:
@Jaron Walling That's what I have always understood as well. Doesn't this create a pretty big issue for the basis of the BRRRR method?
I’ve always understood the goal was to get it rented out and have it cash flowing while you’re waiting on the seasoning period to end. Also, there is not incentive if you paid cash for a deal and the refinance seasoning period. At least not to my knowledge!
Originally posted by @Young T Song:
Awesome Job! Can you explain more detail about the opportunity fund? We are trying to do 1031 exchange as well. Thanks
Yeah! It’s a whole complicated step but I’m happy to PM to explain how we did it
Congratulations. Are you investing locally or out of state?
I also looked up opportunity zones for those interested. "An opportunity zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as opportunity zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service" List of them is here: https://www.cdfifund.gov/Pages/Opportunity-Zones.aspx
Originally posted by @Matt Hotze:
Congratulations. Are you investing locally or out of state?
I also looked up opportunity zones for those interested. "An opportunity zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as opportunity zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service" List of them is here: https://www.cdfifund.gov/Pages/Opportunity-Zones.aspx
We invested locally. It was a lucky find
@Daisy Ferreiras What are your numbers after the cash out refi? Cash flow?
Sounds like a great deal. Good job 👍🏻
@James Barnes thanks! I’m getting around $260 once I’ve put money aside for repairs, vacancy, and cap ex
@Daisy Ferreiras Aaa-mazing 👊🏻.
@Jaron Walling
If you’re using commercial financing there is no seasoning period. At least with the bank I work with there isn’t.
@Daisy Ferreiras
Congrats! Imagine multiplying those numbers by 10 😁
You can also do BRRR with multi family.
Great Job! How did you find this gem? Any major construction updates or all cosmetic?
@Daisy Ferreiras awesome job! I'm currently doing my first BRRRR deal too
Congrats!
@Logan Reinard thanks Logan! My husband was getting out of real estate investing and was working with a friend to get rid of all of his properties. He told us about having to pay capital gains after we sold, which lead to me deciding to get into real estate investing (my husbands job is a big time consuming and he didn’t have time for it anymore). I decided to try and do a 1031 exchange and found this gem. It was a level 3 rehab so I think I definitely bit off more than I can chew but it worked out!
@Daisy Ferreiras - great job and congrats!
For the Opportunity Zone benefits you and @Matt Hotze mention, the original funds invested must have come from capital gains and you also must set-up a Qualified Opportunity Fund to technically for any asset in an opportunity zone to reap the benefits.
You might be well ahead of that, but just wanted to bring up there's a lot of ins' and outs so please contact your attorney and accountant. It's somewhat of a process and I documented mine here if interested: https://www.biggerpockets.com/member-blogs/12409/86947-my-first-opportunity-zone-experience-and-how-others-can-do-the-same
Originally posted by @Tom Shallcross:
@Daisy Ferreiras - great job and congrats!
For the Opportunity Zone benefits you and @Matt Hotze mention, the original funds invested must have come from capital gains and you also must set-up a Qualified Opportunity Fund to technically for any asset in an opportunity zone to reap the benefits.
You might be well ahead of that, but just wanted to bring up there's a lot of ins' and outs so please contact your attorney and accountant. It's somewhat of a process and I documented mine here if interested: https://www.biggerpockets.com/member-blogs/12409/86947-my-first-opportunity-zone-experience-and-how-others-can-do-the-same
Hey Tom,
That's exactly right! We talked to our tax guy and helped guide us on setting up a multi member LLC in order to set up a qualified opportunity fund. I would recommend anyone interested in investing in an opportunity zone to consult with a tax advisor and an attorney. We found that really helpful
I just looked at house that is a HUGE REHAB in a mediocre pay back. It would be my first flip... not sure I'm ready for it.
Glad to hear everything worked out great!