My first BRRRR deal. Purchased an 800 sq ft 2bd/1ba single-family residence for $455k in 2019, which my builder/business partner Joseph Camile and I fully remodeled and added a bathroom (total cost: $80k). Remodel (i.e. Phase One) took about 2 months. Unit was rented for two years at $2900/mo. It has now been re-rented for $3395/mo. See below for Phase Two.

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

I've been looking for a good BRRRR deal ever since reading the BRRRR book by David Greene.

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

My builder buddy Joseph Camile found this deal and negotiated the purchase from the owner.

How did you finance this deal?

Funds used for Phase One: Proceeds from the sale of the Newport Beach condo (see those deal details in my profile).

Funds used for Phase Two: Remaining proceeds from Newport Beach condo + line of credit funds + stock sale proceeds.

At the conclusion of the construction, we secured a $1.2M cash-out refi with a $1.725M valuation, so we were able to recoup almost all of our invested capital. Loan terms were 7/1 Interest-Only @ 2.61% with a monthly payment of $2610/mo.

How did you add value to the deal?

After Phase One was completed and the unit was rented, we began on Phase Two, which was construction of a duplex on the back of the 7000 sq ft lot: a 1000 sq ft 3bd/2ba downstairs unit and a 1800 sq ft 4bd/3ba upstairs penthouse unit. Total construction time: 18 months (many Covid delays) and cost: $775k (many Covid cost increases). Leases signed for $3345/mo for the downstairs unit and $5145/mo for the upstairs unit, for a total gross monthly rent of $11,885.

What was the outcome?

After Mortgage ($2610), Taxes ($1114), Insurance ($250), Water/Sewer/Trash ($400), Landscaping ($100), Security ($150), Repairs & Maintenance ($350), Reserves ($625) and 5% Vacancy Loss ($600), the Total Monthly Cash Flow is $6286. Total Cash-on-Cash Return is 73%.

Lessons learned? Challenges?

- Everything takes longer and costs more than you expect, especially when you throw in a global pandemic.
- Builders are not always organized and good at record-keeping, so be careful when partnering with one.
- Do NOT overbuild. We spent too much and overshot the neighborhood, so the comps simply didn't justify the valuation we were hoping for.
- Be patient. This deal was supposed to be done in less than a year. Instead it took over two, but thankfully the num