Investment Info:
Single-family residence buy & hold investment.
Purchase price: $40,000
Cash invested: $27,000
One thing to note here is that we did all of the work ourselves and a lot of things went wrong in the first two years that cost us a few thousand dollars. I included those losses so these numbers could have been better had we been more prepared with a game plan. Very good learning experience.
Purchase Price (6/2018): $40,000 cash
Rehab Cost: $27,000+ with some carrying costs
Appraised value (12/2020): $90,000
Cash out refi at 70% LTV: $58,000
**I was required to pay off my car note in order to reduce my DTI for approval. This payoff was part of the refi and original cash out was approx. $63,000.
Mortgage payment (includes taxes and insurance): $509
Current rent: $950/month on a 12 month lease.
Cash Flow: $181/month
**Includes 10% ($95) vacancy expense even though I am currently self managing.
What made you interested in investing in this type of deal?
Was looking for a BRRRR property. After extensive research, I decided to purchase in a low income neighborhood in Indianapolis (Riverside) that had more than one multi-million dollar development project nearby. The development projects of 16 Tech and Riverside Regional Park should help boost property values over the next 5-10 years.
How did you find this deal and how did you negotiate it?
Found on the MLS through Zillow as a for sale by owner. Offered $35k cash but seller claimed to have an offer of $40k asking price with financing so I agreed to the asking price of $40k cash. This was done through my agent.
How did you finance this deal?
I partnered with my father who fronted the purchase price. We paid cash.
How did you add value to the deal?
My value came in the form of some rehab costs, sweat equity, property management as well as opportunities for bank lending in the future (current refinance) whereas it's more difficult for my father who is retired.
What was the outcome?
It's a successful BRRRR and we nearly recouped our full investment even while losing money in carrying costs. If nothing else, we learned a ton from this first deal!
Lessons learned? Challenges?
Before purchasing a property lay out your game plan and stick to it. We changed our minds about what we wanted to do with the property multiple times. Vet your subs and have legal agreements in place for the scheduled work. We hired someone for plumbing and HVAC work, and after completing maybe 20% of the work they asked for half of the payment ($2,000). We paid them and never saw or heard from them again.
