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

[Rashaad Baten]

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

[Rashaad Baten]

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