Hey Everyone,
I wanted to share my first BRRRR success story with the BP community. It's a bit lengthy but you can scroll down the find the details of the deal.
STORY:
First, some quick background (deal starts on 3rd paragraph)- I bought my first rental property at 21 while living at home. It was a foreclosed townhouse that was turn-key. Buying rental property became a goal when my high school economics teacher made Rich Dad, Poor Dad required reading. On a side note, I'm still in touch with friends who were in that class with me and it's interesting how it influenced the trajectory of my life versus theirs. Anyhow, I held that rental for 3 years with minimal vacancy and sold it for 36% more than I purchased it for.
I used the funds from that sale to buy my primary residence. I'll admit shiny object syndrome influenced my next purchase a bit. I wanted to live in a nicer area, and bought a new house from a builder. This was nice for about two years but I started to self-reflect and found that I was straying from my initial goal of passive income and wealth generation, my JOB was the only source of income. Then I found the BP Podcast. @Joshua Dorkin, @Brandon Turner, and the guests had me hooked. Listening the the podcasts and joining the community helped me get back on track. My fiance @Natasha Singh also quickly became a fan. I knew that my market was heating up quickly and selling my house would free up a good chunk of cash for investing. I also knew that i'd have more funds from selling vs. a HELOC and didn't want to do a Refi. I put it on the market and quickly found a buyer who gave me asking price. Now I needed to find a new primary residence. In seeking an investor focused realtor to work with going forward, I found @Andrew Davis and quickly found that our similar goals and mindsets would make for a great working relationship. We put a contract on a new primary residence soon after and our offer was accepted. My buyer's lender taking longer than expected to close the loan made the whole process more frustrating than it needed to be, but we got through it.
DEAL:
We had looked at several potential rental SFRs, Passed on a few, got out bid on some, and never heard back on others. I had seen a REO 3/1 SFR built in 2000 that was not even 10 minutes away from me but had always scrolled past it because I was looking for a 3/2 at a minimum. We conservatively estimated that $10k in rehab was needed to get it rent ready. 3/1s are rare in this area and I talked myself out of it because I wouldn't want a 3/1 for myself. I let my emotions get in the way. After realizing this and getting over it, I figured why not? After a few weeks the property went to online auction and we started bidding. At the end of the auction, we lost and were outbid by 1k. A week later, the auctioneer contacted us to inform that the home was ours now as the initial winner had pulled out.
The property was purchased cash and I soon got to working on the rehab. It was all DIY with the exception of roof and A/C repair. Interior and exterior paint, new doors and frames, new flooring, garage door repair, new appliances and appliance repair, and other miscellaneous fixes were done by my dad and I. After putting in a good amount of sweat equity, the rehab ended up costing half of what we originally estimated. I wanted to do a cash-out refi sooner rather than later and read up on Delayed Financing which would allow me to cash-out refi up to my purchase price within the first 6 months of purchase. I then reached out to several lenders, most of which weren't at all familiar with Delayed Financing or didn't know enough. I finally found one after reading another success story and reaching out to another BP member. The process was then started. This is where the two R's got switched in BRRRR. I refinanced before renting. Without further ado, here are the approximate numbers:
- $94,000 purchase price after auction premium
- $5,800 rehab on other expenses (i.e. interest on my dad's HELOC used for some of the cash)
- $127,000 appraisal, lender used $125,000 for loan
- $90,000 cash back after Delayed Financing Refi and closing costs
- $93,000 is the loan amount at 75% LTV
- $1,075 is the monthly rent
In summary, I was able to use just shy of $9k to generate about $400 in monthly cashflow after expenses. I will be managing it myself and would like to think that it's somewhat tenant proof. That being said, even if my expenses were to increase lowering cashflow to $300, my annual cash on cash return is still over 30% which I quite like. I'm not sure I would have been able to do this without what I've learned from BP and for that I am thankful.
I'm still working on the Repeat part of BRRRR as we speak. If you're local or familiar with Central FL, the townhouse was in Avalon Park, first primary residence in Windermere, second primary residence in Clermont, and the current investment home is also in Clermont. In the mean time, here are some pictures of the property.
