Main House with Detached Studio BRRRR

[Blake Dailey]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $170,000
Cash invested: $14,000

This property is a 3/2 main house with a detached studio that was purchased FSBO from a great couple who were in pre-foreclosure on a seller financed note. I was able to close just before the lender foreclosed so it saved them from dealing with that mess, got the lender paid off, and it was a great buy for us. At closing it appraised for $50k higher than what we purchased it at - before repairs! The owners had several animals so we had a horrific smell to deal with, but other than than it was a light cosmetic rehab after the deepest of deep cleans. My wife and I did all of the work ourselves and furnished it to be a short term rental. So far its only had a few days of vacancy and is performing very well. We will refinance it to pull our cash invested out to complete the BRRRR.

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

It is an undervalued, off-market FSBO in a great neighborhood with stellar amenities.

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

I found it on Zillow listed FSBO. There was one blurry photo taken at night that only showed the side of the main house. I called the seller and built rapport and figured out that she needed to sell fast because her lender was about to foreclose on her. She told me the amount she needed to avoid the foreclosure. This was a lesson to ask questions and listen.

How did you finance this deal?

I used a local portfolio lender (local credit union) and a private money lender (my first) for the down payment. We put our own money into the repairs. My lender will allow me to cash out refi to pay back my private money lender after 60 days.

How did you add value to the deal?

We started by cleaning out any evidence of animals and repaired the damage they had done to the trim and walls. We then painted the whole house and detached studio unit and replaced fixtures that were broken or worn. The rehab itself was relatively light, it was just a large squarefootage and the animal smell and damage was extensive. After all that we furnished it.

What was the outcome?

The outcome is a short term rental that is performing amazingly. We listed on Airbnb as 3 separate units - the main house itself, the studio unit itself, and the whole property as one. Guests have loved that they can get a very nice and large house to stay in that sleeps 12, has a pool and is close enough to the beach. And the two smaller listings help get all the days booked and provide for more bookings and more good reviews.

Lessons learned? Challenges?

Lessons learned - strong animal smell is a pain to remove! By the process of elimination of trying different things we finally got it smelling good. We aired it out, washed the floors and walls, used an ozone generator, deep cleaned everything, aired it out, painted, aired it out again and essential oils at the end sealed the deal. Our challenge was doing everything ourselves while both working full time. We spent two weeks of working until 11pm or midnight but it was worth it.

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

My local lender at the credit union was a big help to get it financed initially and then have the flexibility based on my past performance to only require a small seasoning period to be able to refinish the cash out.