First BRRR in Memphis - Did everything we weren't supposed to do

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First BRRR in Memphis - Did everything we weren't supposed to do

Rashaad Baten
Member since 2019 · 6 posts · 11 votes

Hey y'all,

My wife and I have been hunting for our first property since March of this year. After hours of hunting the MLS, 100+ deals researched, and about a dozen offers in different states, we have our first property. We chose Memphis because of its rental population, price, and growth. My wife is in the military, so we'll be investing out of state at some point, so we figured we can take the risk now.

The Property

$34,000 after taxes and fees
3bd/2ba 1100sqft
Comps $65k - $75k  |  Rents $700 - $775

We found the property at Auction.com. We'd been looking for deals for a few weeks in certain areas, and finally pulled the trigger on this one. We created a map of zip codes in Memphis (and no-go areas), but still ended up purchasing in 38127. With no good way of checking on the property, we just walked the neighborhood via Google Maps, and decided that it could be something we could risk.

The photos from Google showed it occupied as of 2017, but the MLS stated that the property had been for sale for 12 years. So the data was a little wonky. We were hoping that the rehab would only come in at $20k, as long as there wasn't too much deferred repairs. Then, if we could refinance, we'd be able to take most of our money out. We definitely got a huge surprise when we went into the house.

The First Look

It was purchased at auction, so when we closed, we just got a good luck from the title company, and that was it. Thankfully, someone had already broken the lock in the back, so we didn't need to kick the door in. We were expecting it to be bad, but we weren't ready for what we saw.

There was stuff everywhere. Anything of value was gone, and everything else was clothing, food, documents, and furniture. And when I say anything of value, I mean the water heater was gone. The furnace was gone. The air conditioner was gone.Exposed wire had been snipped for bits of copper.

We learned later that we purchased the local party house, where kids would go to skip school. Also the spot where people would go in and sleep every now and then.

    View of the kitchen

    A view of the living room

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      • Luciana W.
        Rental Property Investor · Savannah, GA · Member since 2019 · 66 posts · 30 votes
        6y

        Gosh..! That looks super dirty, the good news is that clutter and dirt are easy fixes!

        The cabinets, from the pictures, looks like it could be refinished

        Please keep us posted how the brrr end up going!

        Good luck and congrats on your first property 

        0Reply
      • Rashaad Baten
        OP
        Member since 2019 · 6 posts · 11 votes
        6y

        Cleanup

        We were a little ready and had the electricity turned on immediately, but now we could see the amount of work we needed. We needed a cleanup. The is where my wife shined. She got a hold of multiple crews who come over to give us bids to remove everything in the house.

        We ended up going with someone who turned out to be a contractor also. He spent time with us walking the house and talking about choices between rentals and flipping. And pointing out what needed to be done. It turned out that the bones of the house were good, it was just a mess and missing some big-ticket items.

        After about 2 hours, W\we put together a deal to clean out and demo the bathroom for $1050. And work on the house for $5k in labor. We decided on redoing the bathroom and adding a tub, painting the kitchen cabinets and adding hardware, painting the interior and exterior, and other small fixes around the house. We'd just have to pay for materials, and didn't have to pay him until he was 100% done.

        Cleanup and demo $1050
        Contractor labor $5k
        Estimated materials $3.5k

        It took 8 hours to get everything out of the house, and we discovered perfect hardwood floors under the laminate.

        Landscaping

        Before we landed, we knew that we needed to remove a few trees from the property. One of the guys who came to bid on the cleanup suggested a tree removal person that we ended up going with. They removed trees that were blocking the main window in the living room, and cleaned up trees that were overhanging the roof. 

        We agreed to $1200, plus $300 to haul away the branches. We've paid for the cutting, but so far have been ghosted for the cleanup. Thankfully, we only pay when the job is complete.

        We forgot to take a before picture

        We're still waiting for the branches to be cleared

        Running total - $36,250

        Estimated Total - $54,000

        1Reply
      • Account Closed
        Rental Property Investor · Central, FL · Member since 2016 · 950 posts · 821 votes
        6y

        Doesn’t look horrible.  But it also isn’t worth much money at the end.  This is a long term coin toss for whether it will make money.  You need to get this updated and rented to a legit tenant ASAP and hand this to a property manager that can handle this type of property.  Good luck.  

        0Reply
      • Rashaad Baten
        OP
        Member since 2019 · 6 posts · 11 votes
        6y
        Originally posted by @Luciana W.:

        Gosh..! That looks super dirty, the good news is that clutter and dirt are easy fixes!

        The cabinets, from the pictures, looks like it could be refinished

        Please keep us posted how the brrr end up going!

        Good luck and congrats on your first property 

        The contractor thinks that the cabinets aren't too bad and can be refinished. Hopefully he's right.

        0Reply
      • Rashaad Baten
        OP
        Member since 2019 · 6 posts · 11 votes
        6y
        Originally posted by @Account Closed:

        Doesn’t look horrible.  But it also isn’t worth much money at the end.  This is a long term coin toss for whether it will make money.  You need to get this updated and rented to a legit tenant ASAP and hand this to a property manager that can handle this type of property.  Good luck.  

        Yea, we didn't think it would be a home run, but something to get us started. We paid cash, so we don't have to feel rushed getting the property rented.

        1Reply
      • Rashaad Baten
        OP
        Member since 2019 · 6 posts · 11 votes
        6y

        The Roof

        After clearing out the trees, we noticed the dip in the roof. After talking with the neighbors, we learned that a tree had fallen on the roof, and was poorly repaired. Additionally we had a couple of water spots inside. After getting a few quotes, we learned that there were multiple large patches all along the roof that needed severe repairs, so we needed to redo everything.

        Roof labor $1875
        Roof materials         $1541

        Area needed repairs after the fallen tree

        Surprise repairs!

        Walking the Neighborhood

        One of the things we learned from the BP podcasts was to know your neighbors, and my wife did just that. We learned the history of the house, met with all of the neighbors within 3 houses of us, and met some wonderful people. We now have the neighbor directly across from us keeping an eye on our property, and got leads on a couple more properties that may be available.

        The biggest win we got was meeting the crew who were working on a property a few houses up from us. We were able to get recommendations for work, learn all of the goings on in the area, had them to come by the property for some feedback, and made new friends.

        After our first look at the property, and learning that it was basically stripped, we were stressed. And the initial estimates for a new hvac, and cleanup were pushing up to the $18k range without doing any other necessary fixes. We thought we'd made have made a terrible decision. But by meeting people, and asking for recommendations, we just might be able to get away with $18k for the whole reno.

        Running total - $39,666

        Estimated Total - $54,000

        0Reply
      • Nick Monge
        Rental Property Investor · Denver, CO · Member since 2018 · 74 posts · 25 votes
        6y

        @Rashaad Baten This is awesome. Congrats. I'm looking at a property right now in 38127.. I'd love to connect with you and get the info on the guy you used for demo/rehab. That sounds like a very fair price. Also, I'd like to find out who did your roof. Was the whole roof job $3,416?? I'll shoot you a connect request. I'm also looking for my first BRRRR in Memphis.

        Roof labor $1875
        Roof materials         $1541

        0Reply
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