Single Family JV BRRRR property in Apopka FL. My wife, @Mickie Holmes and I did 100% of the rehab aside from the HVAC install and an assist from a friend on some electrical. Our JV partner we flipped one with in 2019 funded purchase, holding, and rehab costs. We turned an odd second living room into a 4th bedroom making a natural 4/2 layout. This house is a Jim Walters Home, an engineered kit/shell house that's overbuilt in many ways. It sits with subfloor 48" off the ground on concrete piers, plenty of room to get underneath which came in handy for new tubs, rot repair, and termite treating the piers.

Purchase price: $80,000

Rehab and Holding Cash invested: $19,000

Our equity earned through rehab cost saved: $30,000 'note' & 24% ownership held in an LLC my wife and I own.

ARV: $175,000

Rent: $1450/mo

Refi: Delayed 18 months or so for good reason

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

For the time being, we are full time Realtors and part-time investors. We currently don't have the capital to do our own deals solo, although that will be a transition we make in the future. We're building great transactional volume momentum as Realtors and will continue as we love everything about investment real estate whether or not it is dealing with our capital and deals or helping to smartly deploy capital for others. For now we hunt great deals for local and out of state clients. We've closed many single family BRRRR and buy & hold deals, a handful of duplexes and a recent 6plex. With every deal, I put myself in the shoes of my investors, considering whether I would buy this given deal if I were them. Sometimes their goals are different than mine, but if I aligned with their goals and would buy the deal, I'm interested in every single one. I get the experience and thrill of the deal out of every one we close, but this one was a great opportunity to end up a quarter-owner in our own BRRRR for some sweat equity, project, and property management. And we didn't go under contract with that in mind.

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

Like almost every deal we ultimately close, this one was pursued for an investor. We got it under contract, did an informal inspection with a contractor, and ran numbers to see it was solid (actually better than we expected). It had been a Short Sale on the market for nearly a year, starting at $135k. By the time we looked at it, it had dropped to a more reasonable $85k. The list agent told me directly "If we can get $80k, it's done" and so we did it. Bank approved, we got roped back into a $3k short sale fee we tried to avoid by out-wording the legalese on additional terms, but it didn't work and was still solid so we closed. Negotiations were done before it became our deal.

What was the outcome?

Our buyer ended up having a surprise rehab expense on another in-progress flip two hours away. This deal here was a solid deal, but he needed to exit. He had $500 EMD tied up and the listing/title side was pretty incompetent at everything. So rather than go to them to officially cancel and re-offer, we assigned it from the original buyer to a Land Trust (on a non-assignable contract, score!). Then we moved beneficiary interests from the buyer to us, with the original buyer getting his EMD + $500 at closing as a thank you for letting us pick it up. We closed with my cash partner owning 99% and me at 1%. This gave me the ability to self-manage since I don't do property management with my brokerage. It also allowed me to discuss rent, timeline, etc with potential tenants. Our partner refused to take the commission into account, so I earned a little there too. He funded the rehab account we were both signers on, and I bought rehab materials as needed from local home improvement stores, some tings from discount wholesale shops or FB marketplace. My wife found some incredible deals like $300 for a Range, Microwave and Dishwasher and $420 for a house full of cabinets we used in the kitchen, bath, and gave away a few spares. Thanks mostly to stupid high COVID lumber prices, our partner put in an extra $4k to get us across the finish line.

We had rehab bids from the previous due diligence, but we knew that everything was within the realm of what we could do personally. I'm not a contractor, but my Dad was a custom cabinetmaker and overall DIY-master. So with that, my own experience on lighter rehab and DIY work, conversations with contractors and vendors I know, and Google/YouTube, we pulled it off.

A few things maybe should have been permitted if you asked the municipality, like the back deck that was torn down to the concrete piers, or replacing a shower valves and all shutoff valves, water heater, adding a few outlets etc. However, nothing was beyond handyman skill level and I'm confident all was done to code. As a rental instead of a flip, I feel better also knowing anything that breaks is on me to fix anyways. With the house being only 20 years old, the underlying plumbing, HVAC, foundation, and electrical systems were fine, and easy to add to since all were split on clean separate circuits like they should be.

All of our work was all actually done better than the crappy original 'contractor' who finished this place 20 years ago. Jim Walters builds the shell with roughed in systems, and the homeowners used who they wanted to finish it out. Whoever finished this out didn't have any business doing so. We had a new HVAC system professionally installed to get rid of multiple window units, and a friend with electrical experience assist in adding a few outlets and moving a few others. Everything that was fixed, such as rot by the improperly flashed back deck, subfloor rot around toilets, and various other things, were all over-repaired and over-built for my own peace of mind. The tile has durock screwed down in a bed of thinset. The top is double coated in red guard before tile. The glue down vinyl plank is over a fresh layer of 1/4" ply nailed down every 8" with new 3/4" PT plywood anywhere that was soft. I fixed an isolated rotted section of mud sill near the rear deck and I think it could hold an elephant now. The cabinets are painted second hand cabinets from FB marketplace, flooring is under $.60/sf, appliances are new-ish but used. The sink is from our client's previous deal who went granite after shipping a sink to us from HD, she said to keep it and put it to use, so we did.

We tried to shave costs everywhere we could, but spared no expense or time in making sure I won't need to go behind drywall or under floors for at least 20+ years. Some things like the cheap flooring actually swelled our time input vs an easier flooring to install. It limited our partner's cash but increased our time. So those were lessons learned into the next, and why flooring contractors likely suggest one over another. Many finishes like the laminate counters and fiberglass shower surrounds can be replaced with granite and tile in the future when the neighborhood warrants it (Tubs are new steel tubs). The glue down vinyl can have nicer LVP or LVT laid over it someday. But the next future update will be much less deep-dive than the initial rehab to put this property into use.

The structure of this deal financially has worked out phenomenally. People always ask numbers and breakdown, so here's the basics:

The Deal Structure in depth:

Partner put up $95k cash to purchase and cover rehab hard costs

Partner put in an additional $4k near the end - will get reimbursed dollar for dollar this year from cash flow.

My wife and I put in about 600 hours, tracking by hour and task to get to a fair $30k

The HVAC contractor had a 0% for 18mos offer, so we put $4925 on that. Paid a couple payments during rehab, but now cash flow pays it.

House needs a roof, but likely has 2-3 years left before it leaks. Rather than drop $6500 on a roof, we're hoarding cash flow to put one on in 18 months. It would be tricky to get a refi with a 21 year old roof, but functionally it's still keeping water out and I patched a handful of missing shingles.

By the time we put the roof on it and have paid off the HVAC from cash flow, we'll have also paid our partner back his 'extra' $4k he put in. So he's taking payments on $95k at 4.5% interest for 30 years, rounded to $500/mo. At the time of refi, we'll have a 'free' HVAC and 'free' roof that didn't cost either of us out of pocket. He'll have the remaining principle of the $95k left and we'll have $30k owed for rehab. Taking only these two numbers into consideration (gracious of our partner) breaks equity down to us owning 24% in an LLC my wife and I have, and our partner having 76%. We'll also split cash flow 76/24 and I'll collect a 10% PM fee plus 50% of first months. It'll equate roughly to us splitting cash flow, but allows us to outsource PM and not affect the core split of cash flow if we so choose.

So he went from 99% of a neglected house worth $80k (+$15k rehab cash) to 76% of a house worth $175k today. Without lifting a hammer or grabbing a drill, his $95k became $133k in value (76% of $175k ARV). Our $0 input and 600 hours of labor at 'only' $50/hr became both $30,000 AND 24% ownership of this house. 24% ownership is worth a total of $42k meaning we could cash out today and have made $12k on top of labor. With massive mixed use development plans coming to the neighborhood, 5-7 year appreciation will be huge on this and it may even have office use someday. We ran numbers assuming a conservative $1250/mo, and a few PMs told us we were too high. It was almost a daily occurrence for folks to stop by and ask about it being for rent or sale. We decided to start giving a rental price that would be supported in a slightly nicer neighborhood. It couldn't hurt, we weren't done with rehab. Nobody batted an eye at $1500 with lawn care, $1450 without. Nicer larger 4/2s are easily $1600, so an affordable 4/2 is rare. The neighborhood is a little run down, but people are great, schools are great, crime is low.

Around October, we had a gentleman ask about rent and when we'd be done. We told him Dec 1st and he said that would just barely work, his lease ended at the end of November. He kept checking in with us, and by November was forcing a cash deposit on us to hold his place to be first to apply. We ran background screening, credit, talked to employers and past landlords. These folks made 150% of our required income, had almost no credit, certainly nothing bad, and had gushing compliments from their employers who said they'd work 8 days a week if they could figure out how. They excelled financially and lived below their means, and simply needed a home. This house turned out really nice, but they were approved and lease signed before we had floors laid or counters installed. Ultimately our rehab ran long and they were staying with family. We pro-rated their first month and let them move in before I had installed the kitchen sink, dishwasher, or about 150' of baseboard left. They were happy to be in and I finished up inside as quickly as possible. They always paid rent cash before, but we helped them get on board with Apartments (formerly Cozy) and they have paid rent January and February on time. Other self managers out there, don't let people move in before you're done, I probably shouldn't have. But it worked and I'm glad it did for all!

Lessons learned? Challenges?

As we do better in our transactional real estate sales, we have more capital and less time. If we did another deal like this today, there are many of the grunt-work type jobs like hauling trash, scraping up layers of vinyl tile, etc that would have been best hired out. They weren't $50/hr jobs despite us putting that on the spreadsheet. My wife truly despises glue down vinyl, it's so much more labor intensive than I thought and she personally laid it all. We both tag teamed the house paint, drywall, cabinets, tile, and other jobs. We each would say at the end of any task that we'd hate to do that full time 5 days a week. We were happy it was done and on to the next. I promised her we'll never do anything but floating LVP/LVT ourselves. Glue-down is awful!

So while we didn't do it for the love of 'playing contractor' we couldn't help but love the results of every step. The joy of taking this neglected home that's starting to fall apart, and turning into a really nice rental for a family to enjoy is incredible. I don't want to do contracting jobs for others, but "Will work for Equity" sounds good to me.

The next job we may be writing a few checks for things we did ourselves on this one, the structure of partnership will remain similar and we'll still likely do the bulk of the work that takes pricier contractors to do. Also, having done the entire rehab ourselves, we are now in a great position to manage a project with hired help knowing what is involved in each step. If I could find another just like this, we'd buy it yesterday. Our partner already has the funds earmarked for another. If we do another, hopefully it won't need a roof for this delayed aspect, and we can refi out of it and this at nearly the same time to really get the ball rolling.

Our first flip with this partner last year was a great learning experience that basically broke even. The lessons learned from that helped us make this a phenomenal deal that will pay out in cash flow and equity for years to come. A few outside details still left to go, but its 99.9% of the way there.