Originally posted by @Renat S.:
@Sammy Lyon
You are super enthusiastic, lets see the numbers. 10 units in 10 months and you only put down for first property? That sounds too good. Let’s see the numbers and details.
Hi Renat, challenge accepted ;)
Deal #1: SFR. 20% down traditional financing. Invested $14,000.
Deal #2: SFR. JV partnership. Partner brought purchase price and renovation costs as capital contribution. My job is to do everything else, we split ownership & all operating expenses and income 50/50. Partner’s capital contribution is prioritized at sale or refinance. On operating expenses since closing I have spent $2,300 (my half of a rent ready, since we had a tenant turnover).
Deal #3: SFR. Hard money lender for purchase. Minimal repairs ~$1,000 at closing.
Deal #4: SFR. Private lender for purchase. Loan was for higher than the purchase price and is not secured only to this property, so I have been able to use some of the funds to make the repairs on deals #3 and #5.
Deal #5: Duplex. Hard money lender for purchase. Have an unexpected rent ready due to a tenant turnover after closing, so using private money for renovations and some of my reserve fund. Will refinance at higher ARV so expecting to get it back but I may end up investing ~$5,000 on the rent ready for about 30 days until the refinance closes.
Deal #6: Duplex. JV partnership. We reinvested the funds from our BRRR cash out refinance (Deal #2). This will be another BRRR.
Deal #7: Duplex. Private lender for purchase and renovations. May end up using $3,000 of my own money for going a little on the higher end of my renovation budget due to an unforeseen issue, so I’ll be going over the borrowed amount. I expect to get this back soon in the refinance since I’m doing a big reno on this one.
So my own money has come into play twice, both times when I closed on a property and the existing tenant moved out soon after closing. Using “none” of my own money for purchases and for most of the renovations is how I have kept healthy reserves for each property, which can tide me over on a tenant turnover to make repairs until I refinance. All in all it would add up to ~$9,000 of repairs for the 9 units after the first deal, and total $23,000 for all 10 units. Except for the $14,000 from the first deal, I expect to get back most or all of the repair costs since they are BRRRs. Stay tuned for the refinances though.
I consider those "unexpected" expenses part of the normal operating expenses of a property, that are to be expected, rather than initial capital contributions for purchase and renovations. The rent readies did end up helping get me the higher appraised value too, making it easier to recoup the funds quickly through the refinance. I had budgeted for the repairs in my Capex and maintenance reserves—I just wasn't expecting to use them so soon! I don't advocate for people to buy property with no money in their reserves account, personally.
It definitely makes me want to buy more vacant properties so I can just do the repairs right when we close rather than wait around to figure out the tenant is leaving! But I guess it’s part of the stabilization process when buying a property with inherited tenants… That is one thing I am having to get used to—the slower-than-I’d-like post-closing process to get the property up and running smoothly. I have found I enjoy the deal hunt more than the asset management.. and I am definitely learning as I go!!
