Investment Info:
Single-family residence other investment in Saint Louis.
Purchase price: $51,000
Cash invested: $40,000
The exit strategy for this SFR was BRRR. I live in CA and did this project in MO. Because of that, I read the BRRRR and Long-Distance Real Estate Investing books by David Greene before and while doing this project and it helped tremendously. I bought this property in distress through a wholesaler. I bought it using HELOC funds and used OPM to renovate. Purchase price was 51K, renovation was 42K. I was able to put all funds including renovation funds into the purchase of this property. The objective of that is so I could do a cash-out refinance on the property without having to wait for a seasoning period through a technique called Delayed Financing. I got the property tenanted as soon as I finished renovations. I then proceeded to refinance and was able to get 95% of funds invested (including purchase and renovation amounts). Currently, the monthly rent on this property is more than twice the monthly mortgage payment.
What made you interested in investing in this type of deal?
I bought another property through a turn-key investment co in STL. At the same time, I was reading the books BRRRR and Long-Distance Real Estate Investing, both by David Greene. After visiting the STL area during the purchase of my turn-key 4-unit, I decided to use the information learned from the books to do a BRRRR project. It was scary at first as I had to build a small team in a city that's over 1200 miles away from where I live.
How did you find this deal and how did you negotiate it?
I found this deal through a local REA that specializes in investment properties. I negotiated with wholesaler through my REA in order to get to an acceptable purchase price given the conditions of the property. We went back and forth at least three times until we found a price that was acceptable to all parties.
How did you finance this deal?
The purchase price was financed with a personal HELOC. I also obtained funds from my parents retirement account for rehabilitating the property. I purchased the property in my name and my parents name and drew a Secured Promissory Note using the subject property as the collateral. I gave my parents 12% annual interest on their loan and agreed to pay all back within 6 months. After the rehab, I refinanced the property on a 30 yr conventional, fully amortized loan with a Mgtg Lender.
How did you add value to the deal?
I completely rehabbed the systems of this property with new electrical and plumbing systems. Also, completely rehabbed the kitchen which included granite countertops and also completely rehabbed the bathrooms. I replaced all flooring, doors, and fresh paint all around. What added more value to this property is that I re-finished the basement by turning it into living area: new windows, outside door, new walls and flooring. That turned the property from a 2 to 3 bed SFR with 2 full baths.
What was the outcome?
It was kind of scary at the beginning, not knowing what to expect from doing a Long-distance BRRRR without ever living in the STL area. However, with the knowledge from reading extensively on doing this type of project and making connections through BP network, I was able to complete this project within 8 months from purchase to last refinance. I made my parents some money on their retirement funds, and was able to recover approx 93% of all funds invested. Not bad for a first timer!
Lessons learned? Challenges?
The biggest lesson learned is that a long-distance BRRRR project can be done mainly due to technological advance and information available through sites like BP, books and networking available through the site. The biggest challenge was to overcome fear of unexpected issues, and several came up during the project. Two of my biggest challenges in doing this project were obtaining the funds to do it, and putting together a reliable team to get this completed.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Yes, this project wouldn't have been possible without connecting with several individuals in the STL area. My REA during the process was Kyle Eckert who I found on BP, and I do recommend him highly. I also used the services of Aaron Mayer with House Warming Inspections during the purchase process. I highly recommend him as well.
