$300/month cash flowing rental for $10k all-in using BRRRR!

[Amanda Cruise]

Investment Info:

Single-family residence buy & hold investment in Youngsville.

Purchase price: $83,000
Cash invested: $10,000

This house is a single family just a quarter mile from downtown Youngsville, NC, which is a quickly growing area. This was our first BRRRR deal. We purchased the home for $83k using $18k of our own cash and a $65k private money loan with simple 8% interest. We put $20k into the renovation (our own money). Tenants were placed after 3 months. At the 6 month mark, we did a cash out refi with an appraised value of $135k. The cash out was 75% or $101k. This left us with $10k in the deal.

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

We heard about BRRRR deals many times on Bigger Pockets and wanted to try it.

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

We sent a round of letters to owners of distressed homes we found driving for dollars. I had sent a mailer about a different home but the owner called and was interested in selling this house instead, so I went to take a look. I offered a cash price and a seller-financed price. We were able to agree on a cash price of $83k after a bit of back and forth.

How did you finance this deal?

We paid cash using ~$20k of our own money and a $65k private money loan for 6 months at 8% simple interest.

How did you add value to the deal?

We renovated the kitchen and bathrooms, painted throughout, and added a closet to a room that previously didn't have one. This brought the home from 3 bedrooms to 4.

What was the outcome?

We put tenants in place paying $1350 per month (which includes a pet rent). We did a cash-out refinance after owning the home for 6 months. The appraised value was $135k. Keeping 25% equity at the bank's request, we got a loan for $101k at close. We netted about $10k in the deal all said and done. The rental cash flows about $300 per month after PITI and reserves for vacancy/maintenance are accounted for.

Lessons learned? Challenges?

The biggest lesson learned was in the contractor we used for the work. We went with more of a handyman to keep costs down. He was trying to fit in the work with other jobs and took much longer to do this job than it should have taken. It should have been completed within a month but ended up taking 3 months. This put us at the end of summer to rent it, which was stressful considering we planned on listing it for rent in June.