HOW I "LOST" $50K ON A BRRRR DEAL

[Lauryn Meadows]

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $150,000
Cash invested: $182,000

BRRRR SFH and fourplex, five total doors.

Purchase price: $150,000
Rehab/ Holding Costs: $182,000
ARV: $353,000
Capital left in deal: $49,600

Cash Flow: $1,300/ month

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

Our company focuses on the BRRRR strategy so we can continue to recycle our cash to scale.

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

My mom was shopping an estate sale when the owner told her he was planning on selling the property. She told me and the rest is history!

How did you finance this deal?

Our private money investor had a total loss on a house fire a couple of years prior. The insurance company was about to close their claim- without giving out the funds because the insured couldn't find anything to purchase to meet the insurance company's requirements to recieve funds. We new about their situation and thought this could be a win for everyone. We also had $120,000 of our own capital in the deal.

How did you add value to the deal?

We put $182,000 in the four plex and SFH. The exterior was in great shape but we had to do a total redo on the interior of most of the units.

What was the outcome?

Our ARV came out lower than I had hopped- actually it came out exactly where I had ran my numbers at, but with unexpected permitting requirements and increased material costs the project was about $70,000 over budget for the rehab.

Lessons learned? Challenges?

BRRRR is my favorite strategy because I'm still getting roughly a 31% cash on cash return of the $50,000 of our own capital we had in the deal. It definitely wasn't the outcome I had hoped for, but it was a learning experience. In this market small multi families are not traded frequently meaning they do not have comps for these properties. I could have still cash flowed great at the higher value I had hoped for, but the comps could not support it. I plan to focus on true 5+ commercial now.