Flip and Hold in South Austin

[Ryan Kelly]

Investment Info:

Single-family residence buy & hold investment in Austin.

Purchase price: $255,000
Cash invested: $70,000

BRRRR property purchased off-market in 2018 with the intention of flipping and holding ourselves. The remodel was fully permitted including foundation repair, full electrical upgrades, plus entire interior remodel. The property now rents for $2100 per month earning the highest rent-per-square-foot in the neighborhood and cash flows approximately $350 a month. New appraisal value at $340,000. Once refinanced, the initial private note investment of $250,000 will be fully paid back.

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

We are buy and hold investors, and in a hot market like Austin, you have to work harder to make a great deal. The 78745 zip code is an amazing location within 20 minutes of downtown and to all of Austin's main attractions. It makes for a great rental area.

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

I am a licensed real estate agent and was visiting with the sellers for a listing appointment. The home had not been updated in decades and I gave them an analysis of what we could sell it for on the market knowing it would be targeted to investors. That's when my wife and I decided to make them an offer that would net the seller more money than selling on the market plus save us money on the purchase.

How did you finance this deal?

We borrowed private money for nearly the entire purchase price with the goal of improving the property and paying off the notes with our refinance. We used our personal funds for the remodel.

How did you add value to the deal?

We did foundation repair plus a fully permitted interior remodel including new electrical panel replacement, additional new LED lighting, full new kitchen and bathrooms, new flooring and baseboards, and new paint.

What was the outcome?

We were able to increase the value of the property by $90k and appraise at $340k. Once completed, we were able to pay off the private notes and are only left with our remodel budget in the property. We were able to rent the property out in 2 days at $2100 per month, the highest price per square foot in the neighborhood. Plus, we rarely get calls from our tenants because the property is in great condition.

Lessons learned? Challenges?

As everyone will say, we went WAY over budget on our remodel. It was a great learning experience to work with contractors and learn more about pricing, timing, and especially the permitting process (which sucks). It might be tricky in Austin proper, but would love to work the BRRRR method even harder to try and get the remodel money out as well on a future deal.

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

I am a licensed Realtor and represented myself on the purchase. I also worked with Jonathan Lange with Infinity Mortgage on the refinance and he is very experienced working with residential investors on conventional loan options.