Second BRRR Deal in St Louis

[Derrick Lloyd]

The current strategy I have been focusing on is BRRR investing in St Louis. I use a HELOC against my condo in San Diego as my pool of funds. This BRRR was the 2nd I have completed in St Louis.

I found the property from a wholesaler I have networked with. The property is a 3 bed 1.5 bath, and it looked like a partially finished flip. I bought the property for $24000, and the original rehab bid was $26411. The wholesaler that I bought from does not allow inspection contingencies, so the risk rehab items that were not on the original bid were sewer lateral, water service line and roof. I did a worst case analysis of $35000 for rehabs, and the numbers weren't great, but were acceptable. ARV was predicted at $75000 and rent at $950

Unfortunately, this project ended up being a gift that kept on giving, except the gifts were certainly not on my wishlist.  

The first issues were the sewer and water service line.  After the sewer lateral inspection, it was determined that the sewer needed to be repaired.  In addition, I discovered that it was required for the water service line to be replaced as well.  Both of those costed $10300, which pretty much put me at the worst case analysis.

After those were done as well as the rest of the plumbing, they did a pressure test, which passed.  However, a couple days after, there was a plumbing leak in the one section of the house that the plumbing wasn't redone (since it was under foundation).  This leak flooded and clogged the basement.  Now there was a 2nd change order to fix the leak, unclog and repaint the basement, another $8900 down the drain (after they unclogged it, of course).

Last, there were some minor fixes after the occupancy inspection, $460.  Overall, the project went way over budget and lasted a lot longer than originally antcipated.

Despite all this, things worked out on the backend!  I was anticipating leaving in about $22k, not ideal!  But the appraisal saved me!  The appraisal ended up coming back at $90k, the absolute highest my agent and I thought was possible.  This allowed me to get a loan for $67500.  Here is how the numbers ended up turning out:

Purchase Price	$24,000.00
Closing Costs	$1,171.60
Holding Costs	$1,642.46
Rehab Costs	$46,071.00
Holding Expenses	$1,774.54
Refinance Costs	$4,720.00
Total Cost	$79,379.60

Refinance Amount	$67,500.00
Money Invested	$11,879.60

And I got even more good news after this.  Originally I predicted the rent at $950, but the property was rented to a Section 8 tenant at $1095, a very significant increase!

With the money invested of ~$11900, and nominal cash flow of $402, the projected return is 40.6%.  Not bad at all considering all the set backs!!

[Derrick Lloyd]

@Megan Brooks I used personal savings to pay it back.  The way I see it is that its a lot less invested than 20% down and doing traditional financing.  Plus 40% return is much better than pretty much any other investment.

@Maxwell Ventura Good question Max. I used the HELOC to pay for the purchase and rehabs. The holding costs (interest on the HELOC) I payed out of personal savings. I had to pay for some of the rehabs from personal savings as well. The $11879 money invested was the money left in the deal after I refinanced, since the refinance wasn't enough to pay of all of the all-in costs.