Textbook BRRR - 3 Bed SFH in a midwest B neighborhood

[Elliot Saks]

Investment Info:

Single-family residence buy & hold investment in Indianapolis.

Purchase price: $55,000
Cash invested: $92,000

Appraisal just came back on this home for $137k. All in for $92k and refinance for $102k.

Neighborhood is a solid B and this property was the worst house (probably a C minus/D condition).

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

I was receiving a daily hot sheet with new MLS deals. I saw this home being offered for $67k in a neighborhood where comps ranged from $90-150k. The seller was in financial distress and needed to sell it as quickly as possible. I got my contractor to go out that morning and put together a scope of work. I offered over asking all cash at $70k and close within one week to get the seller to accept my offer, then had an inspection that revealed some more capx issues. I changed my offer to $55k.

How did you finance this deal?

Financed both purchase and rehab with my HELOC and paid the higher interest for 8 months while waiting to re-fi.

How did you add value to the deal?

Full scope rehab included new kitchen, 2 new bathrooms, new flooring throughout, all new windows, new exterior paint, and significant mold remediation as well as several serious deferred maintenance items. Full scope rehab cost $37k and took a little over a month.

What was the outcome?

Appraised at $137k, pulled out $102k with a result of $0 invested and $7k pocketed after loan closing costs. Property rented for $1350+ and cash flow is around $250 after (expenses + PITI).

Lessons learned? Challenges?

Do not be afraid of a significant rehab challenge.
Do not be afraid to ask for significant price reductions even when you think there is no way the seller will go lower. You never know what others will consider a good deal or the right deal for them.
Learn great negotiation techniques. I highly recommend "Never Split the Difference" by Chris Voss.

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

If I told you, you wouldn't believe me.