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Updated about 4 years ago, 09/21/2020
My First BRRRR - Newark Delaware
Investment Info:
Single-family residence other investment in Newark.
Purchase price: $155,000
Cash invested: $220,000
Purchased this distressed home right outside of University of Delaware and renovated the entire property: new roof, new windows, new siding, filled in an in ground pool, demoed flooded basement and added 4th bedroom, converted half bath to full, refinished kitchen, refinished hardwood flooring, installed LVF throughout home, new plumbing, new electrical, etc. Purchase price : $155k, Rehab : $65k, Comps: $280k.
What made you interested in investing in this type of deal?
My business partner and I researched all aspects of realestate investing and based on our funding and lack of experience it seemed like the safest option to go after a basic single family in need of a renovation in a neighborhood with great comps, then turn it into a rental and refinance it.
How did you find this deal and how did you negotiate it?
We found this deal on the MLS for $170k; previous investor purchased it at sheriffs sale and decided that it was too big of a project to take on so they tried to sell it as is. The property sat on market for a few weeks before we made an offer, the first 2 offers were rejected and we settled at $155k.
How did you finance this deal?
Private lender.
How did you add value to the deal?
We added a 4th bedroom in the basement along with converting the half bath to a full bath.
What was the outcome?
Screening tenants to rent out property at this time, moving slowly due to Pandemic. Planning on financing out of the property using the signed lease into a 30 year fixed.
Lessons learned? Challenges?
We learned that cheap contractors are not worth saving a few hundred dollars if it means they take 10x as long as they expect to finish the work. Similarly, we learned that just because a contractor has a higher price and a big business does not mean they will be professional or reliable in unexpected situations such as our local permitting process and sending in the proper forms to pass inspections.
Only higher contractors that are references from trusted sources.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Nope
Congrats! $220 all in when the comps are $280 sounds like a home run. What do you expect to get in rent from it?
BRRR Numbers are solid. In terms of UD Rentals this is more than likely outside of the UD Student Zone. $2,900 is steep for a family neighborhood. Would anticipate getting closer to $1,600-1,800 in rent to a family. Timing is tough with the pandemic bs going on but may be worth your while to look to sell it. Best of luck!
Good work, the house looks good. You didn't say how much it cost you in Lender fees.
Originally posted by @Rumen Mladenov:
Congrats! $220 all in when the comps are $280 sounds like a home run. What do you expect to get in rent from it?
Hey Rumen, yes it does sound like a home run, but still waiting to cash out. Originally the numbers were PP- $155k, R- $45k, ARV $250k which would leave us with our ideal 20% equity in the deal but midway we decided to add the 4th bedroom and 2nd full bath in basement which increased our ARV to $280... we hoped. Then 2 weeks ago, a very similar 4/2 directly across the street went up for sale and sold for $279k within 4 days on market.
The property sits right outside of University of Delaware so we were shooting for the $700 -$800 per room figure that the college housing is going for, Unfortunately UD is not reopening until next fall so we may have to rent to single families around $2000 for the time being.
Originally posted by @Vincent Garman:
BRRR Numbers are solid. In terms of UD Rentals this is more than likely outside of the UD Student Zone. $2,900 is steep for a family neighborhood. Would anticipate getting closer to $1,600-1,800 in rent to a family. Timing is tough with the pandemic bs going on but may be worth your while to look to sell it. Best of luck!
Hey Vincent, you are correct we are outside of walking distance from main campus but we are across the street from the UD stadiums and our neighbor has been renting out rooms in her house to college students for $700 a room which is where the idea originally came from. $2900 may be wishful thinking, I guess we will see. Thank you for the feedback.
Originally posted by @Mike Jones:
Good work, the house looks good. You didn't say how much it cost you in Lender fees.
Hey Mike, Thank you. We tied our fees into the rehab budget, but it was 8% interest only. Currently at $4,500 but continues to increase until we can find a renter and refinance.
The rooms to grad students would be a great angle. The neighborhoods outside of the the typical college area can sometimes get that.
Well done @Brandon Ropp. Wishing you the best of success as you work toward the much less sexy part of the job now...renting it out, refinancing it and then managing it.
@Brandon Ropp - that's solid. I've been putting offers in all over the place around UD for over a year now. Tough market to break into, especially if you're going for the student rental game. 4-person permits aren't handed out unless there is not another student home within approximately 10 houses, i.e., no more student permits in the good areas. Of course, without students, you're in a much lower rental bracket. Good luck!
@Cameron Fee - I agree, all of Newark is extremely competitive right now. We do not invest in the city of Newark area because of the difficulties with the rental permits, but also because of the new requirements of fire suppression systems in all renos or new construction which can be very expensive. Instead we try to buy houses that are right on the boundary line of the city of Newark to try to get the higher student rent without the other issues.