I thought it'd be informative and informative (and maybe get to brag just a little bit!) to share my first BRRRR deal that me and my partner recently refinanced and created nearly $100k in value on my first true rental property (if I exclude house hacking!).

When I was first learning I always wanted to see the numbers behind the deal, so I’ll share as much as I can and am happy to answer questions, but here are the basics:

Property Type: 4-Unit Student Rental (3 Bed / 3 Bath Units)

SF: 5,120 SF

Purchase Price: $344,800

Rehab: $28,481

Total: $373,281

Down Payment: 25%

Loan Amount: $258,600

Rate: 5.5%

Total Equity Invested: $115,383 (Down payment + Rehab + Closing Costs)

How we Bought it:

This property was bought out of foreclosure through a broker before it hit the MLS. It was completely vacant and needed some work, but nothing crazy. We put all new LVP across the entire property (except the bathrooms), replaced all the exterior doors (there were/are 16!! because each bedroom has a door to the exterior), and made a ton of other small repairs including some painting, replacements of fixtures, etc. Honestly most of our costs were materials + labor for the LVP and doors. We probably over-paid a bit, but I did a long-distance rehab and was just happy that the work was completely right and the contractor didn't run off with our materials.

Now, normally having a property completely vacant isn’t a big deal, but this property is located near a major university and we closed in October of 2018. Therefore, the school year had already begun, and we were concerned if we’d be able to fill the 4 units (and 12 bedrooms). Luckily, given the fact that each bedroom had a door to the exterior, we were able to rent 2 or 3 (can’t remember at this point) of the units on by-the-bedroom leases with the 4th unit being leased entirely (not by the bedroom). We were ecstatic that by Feb-2019, we were 100% leased.

At that time we were renting the rooms for $375/bedroom or $1,125/unit for a total of $4,500 month (1.2% rule!!). However, we have been able to push rents and are now getting $5,225/month (1.4% rule!!) and are hoping to get marginally higher in Fall-2021.

My partner and I knew we bought the deal at a great price and would eventually refinance (our original loan was at 5.5% - go look at the 30-year mortgage charts and see what happened in Oct-2018, they were at all time highs!) and whenever we looked to refinance, the rates on an investment property, 4-unit, cash out refinance, was always pretty high, so we just waited. Then, in September of 2020, when rates were kept dropping, I finally took the time to call around to a ton of local banks and found a credit union that would cash out refi @ 70% LTV at a 3.5% rate on a 30-year term. We immediately proceeded forward and closed the cash-out refinance in late December 2020. Here is the breakdown on our refinance:

Appraisal: $470,000 (honestly think we could sell in the low $500s so was not happy with this valuation)

LTV: 70%

Loan Amount: $329,000

Rate: 3.5%

Old Loan Balance at time of refi: $251,245

Cash Out (After Closing costs): $73,604

Remaining Cash in the Deal: $41,779

The higher loan balance with a rate that was 2% lower resulted in a net increase in our mortgage of NINE DOLLARS A MONTH, while putting over $70k back in our pockets. Based on our 2020 net cash flow of $25,286 we had a 60.5% cash on cash return!

I love real estate.

I don't have before pictures, but here are a few afters:

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First BRRRR (Nearly $100k of value created!)

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