From Hard-Money Loan to BRRRR!

[Winston Reed]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $40,000
Cash invested: $24,000
Sale price: $90,000

Used a hard money loan to cash-out the equity we had in a SFR that we owned free and clear. Then, we rehabbed that house to increase the value and refinanced it into a 30-year fixed rate loan. We actually are not selling the property, but instead holding on to it for cash flow. We netted an additional $23k on the deal and are now using it to purchase another property. BRRRR!!!

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

We owned our first house free and clear and knew there had to be a way to use our equity to get started in buy and hold investing.

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

As I mentioned before, we already owned the property and had a tenant in it, but did not know how to take advantage of that.

How did you finance this deal?

We used hard money to get the property in condition, so that we could refinance it on the back end.

How did you add value to the deal?

We replaced the roof and siding, poured a new driveway, replaced the water heater, added new kitchen cabinets, new windows and painted the exterior.

What was the outcome?

After repairs, the appraisal for the refi came in a little low, so we ended up having to pay one point to increase the refi percentage from 75% to 80% to cover the short fall.

Lessons learned? Challenges?

The appraisal came in low because there were just not enough recent sales in the area that met the value we expected. Something to be mindful of in the future because it can really impact your net profits.

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

Yes, I worked with Johnny Hines at Noble Mortgage and Investments. He is great to work with, especially for newbies because he will patiently walk you through the entire process.