SFH Off-Market Deal BRRRR

[Joshua McMillion]

Bigger Pocket's Family, 

Investment Info: 

Our third RE deal was a single-family home in Northern Alabama with a 3/1.5 split.

Purchase price: $110,000
Cash invested: $32,000 REHAB, $27K Down Payment, Total $59K 

This home was a rental that needed a lot of work, and I was able to place an offer before it hit the MLS because of our ROCKSTAR agent! Before entering the deal, we had our general contractor in place and an estimate of the repairs and upgrades needed. Overall, we had to put on a new roof, extensive landscaping, "60 years of growth never cut", new decking, new fencing, completely remodeled kitchen, updated fixtures and lighting, paint, electrical upgrades, and drywall repairs.

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

I am active duty military and am on a path to #FI. Sophia, my wife, and I have developed a plan of attack for acquiring rental homes in the primary and secondary markets based on where we want to retire. We plan to purchase one to two houses a year, and SFH is the niche of REI I enjoy. I also joined a great mastermind to refine those goals and keep pushing forward towards my designed life! This property has an ROI of 12% and CF's $627 a month after expenses. We also achieved a $250 increase in rent, which the property just rented this week!

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

My #rockstar agent that I found on BPs knew we were looking for a deal and sent us the home. We were able to place an offer while the house was off-market and closed! 

How did you finance this deal?

Conventional Loan with 25% down and a 3.3% IR. 

How did you add value to the deal?

$32K in upgrades to for the whole home. No room was untouched, and the outside also had significant work down. See above for the details I already described. 

ARV: $150, estimated to pull out $40K on the REFI.

What was the outcome?

Home is in the rented part of the BRRRR, and we are estimated to REFI on 11 JAN. New rents are $1250, which was an increase of $250, and we continued to foster a relationship with our core-four in the primary market we want to grow in.

Lessons learned? Challenges?

First, finding a great agent is the most critical aspect. If you find an investor-friendly agent, they often already have a complete team and will save you time. Also, if you use their team, you continually add value to your agent, and when that next off-market deal comes, you will be first on the list! 

Second, handling general contractors and holding them to cost, schedule, and performance. We were able to do a lot of work to the rental home and complete the REHAB in nine weeks using incentive-based contracts. Finding a contractor was the most challenging part, but when you find your GC make sure you treat them right. 

Third, we needed to purchase the property significantly cheaper to REFI all our cash invested. This was our first BRRRR,

and we will leave roughly $20K in the property. We knew that was the case going into the deal, but next time we are wanted to pull out all cash invested to include the downpayment and start using the velocity of money principle! Overall, we will be able to pull out all our REHAB cash invested and positioned to purchase our next rental in 1QTR or 2nd QTR FY22. 

Sincerely,