BRRRR and Rehab Loan near Princeton NJ

[Natalie Schanne]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $247,000
Cash invested: $15,000

Bought Fannie Mae HomePath REO first look house 5/2.5 2827 SF + 2 car garage and 1000 SF unfinished basement for $247,000 -3% assist towards closing costs -3% real estate commission (+650) in neighborhood of $350-400k homes. Great deals ARE possible! Fannie Homestyle Loan allowed us to borrow 310k at 5% interest and PMI with 5% down (16k, when normal rates were about 4.5%) and the $70k rehab loan was rolled into the purchase price. When completed, it appraised for 395k and we refi'ed at 3.125%.

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

Interested in BRRRR / Live in Flip on a primary residence so we can have free capital gains and "sweat" equity / forced appreciation.

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

Found the deal searching the MLS. We offered list price 257k and then got a 10k discount after our home inspection when we showed the A/C didn't work. (We were going to replace it anyway).

How did you finance this deal?

Fannie Mae Homestyle Conventional Rehab Loan

How did you add value to the deal?

We researched the trendy choices and upgraded paint, flooring, kitchen, HVAC, etc.

What was the outcome?

Refinanced at 395k value at 3.125% 30 year fixed in March 2020

Lessons learned? Challenges?

Challenges - in our area property taxes are very high, so we're not looking forward to any increase in our taxes due to our improvements. Current taxes are $10,800/year. Lessons learned - Rehab loans require a deal with one contractor and ours had prices 30% above what I could get on a flip paying cash directly to professional painters, electrician, etc. We brought over 10 people in to bid the deal and only 2 submitted bids, one for 63k (+10% contingency = 70k) the other for 73k.

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

I worked with myself! I found my family a great deal.