08' crash casualty to monthly cashflow monster: Our First BRRRR!

[Ryan Luby]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $140,000

BRRRR:
Purchase: $140k - 3.5% Down
Rehab: ~ $15k
Cash out-Refinance: $175k
Pulled cash out + ~$12k

Gross rent: $2,200
PITI: $1,272
Expenses: $400

Net Cashflow: ~$515 per month

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

Back in the day there were these things called bank-owned properties for sale at a good price.. (sarcasm), this was a HUD property in my market. I knew the area and based on the photos and list price I offered immediately.

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

Found through checking HUD as I do every couple weeks

Previous owner bought in peak of 03-04 & took out two very high mortgages on the property, then was foreclosed on during 08 crash. Which eventually lead to this being a HUD property.

How did you finance this deal?

FHA loan 3.5% Down - Owner Occupant (We lived here for almost 2 years)

How did you add value to the deal?

Took on a big rehab to change the living space making it a completely remodeled, open-concept eat-in kitchen & living room.

Added another arched opening to make the living room less awkward.

Added built-in shelving in the bathroom for storage

Built-out a large closet space in one of the rooms in order to add storage
The closet build out allowed us to elongate the hallway, make each end of the hallway symmetrical, and add a third arched opening from the hallway to the living room.

What was the outcome?

Based on a great purchase price, & DIY rehab we were able to complete a cash-out refi and still keep our PITI low enough that this turned out to be a great BRRRR deal.

*The aim is always to buy & hold for me, but for safety I try and evaluate and run projects as a flip whenever possible. This deal now has around $80k equity still so it's a great flip if we wanted to sell, but it cashflows incredibly & we have $0 in the deal after the refi so we will hold it for those reasons.

Lessons learned? Challenges?

There is great value in knowing your market, acting fast (with showing request/offer), and figuring out how to make a good deal (not finding one, making one).

It was not an easy process to get the deal done (as can be the case with bank-owned property)
We had to "figure out" how to get the house purchased despite challenges with it appraising & passing FHA inspection, but instead of hoping for it to work out, we made it work.