First BRRRR Deal to be buy & hold as a student rental property.

[Adam D Rinehart]

Investment Info:

Single-family residence buy & hold investment in Prairie View.

Purchase price: $110,000
Cash invested: $155,000

This property is my first in the real estate investing world. It is a reverse mortgage foreclosure situation in a rural subdivision within walking distance to a University. The house was purchased as a 4/2 with 1,741 sf of living space and an attached garage. My renovation and rehab will convert the formal dining room to a 5th bedroom and create a 3rd full bathroom from an oversized second master closet adjacent to the dining room. The attached garage will also be converted to additional living space so that sufficient common area is available to the tenants as well as increase the appraised value.

Due to the existing shortage of housing options in the area, homes like this rent by the room to students for $700/month each, not including utilities. The renovation is underway and is scheduled to be complete by December so that it can be fully leased for the Spring Semester starting in January.

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

The location of the University is outside of the development that has surrounded the greater Houston metro area over the last 10+ years. This lack of development in the immediate area around the University as well as the surrounding County as a whole coincided with a large increase in student enrollment over the last 3-4 years. The subsequent housing shortage has created a huge demand with a constant supply at rates that aren't seen outside of student rental markets.

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

MLS deal. There was no negotiating, Federal Law requires reverse mortgage foreclosures to be sold for the appraised value they are listed at.

How did you finance this deal?

Unsecured business loan from "side hustle" LLC where I provide land development engineering services to small developers.

How did you add value to the deal?

Added an additional bedroom and full bathroom and increased the living space by approximately 500 square feet from a garage conversion. Upgraded the interior to current trends and demands.

What was the outcome?

To be continued...

Lessons learned? Challenges?

Finding financing was a huge challenge on this deal. I went from having a silent money partner one week, to not within the span of 10 days. My hard money lender approved me for 80% deals using my income and credit score, but then refused to fund the deal due to lack of available comps (rural area with housing shortage) and a minimum loan of $100k. I ended up getting a business loan for 100% of the purchase price and was able to be a "cash buyer".

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

Not particularly. I used the listing agent since she was also the HUD broker.