All Forum Posts by: Tim Bradley

@Carlos Gaviria

Good questions. Here you go

Deal: I paid cash through a cash out refi on my primary. I did the rehab through a private money loan through family @10% APR. When the seller said no to the 100k it was a pretty hard no. The email back from the seller was pretty rude so there was for sure no wiggle room. Also I saw on the final closing docs that the seller only got around 5K back so if they had reduced to what I wanted then they would have paid to sell the house. It was a relatively good deal.

Rehab: final rehab budget was 80K. The big hitters that totally screwed me were the well, roof and septic. The rest was pretty much within estimates. My estimates came mostly from the BP book on estimating rehabs and some personal experience. I have never dealt with a well before and this one was just the worst and waaaay off my estimate. Like 10x over. Even my well guy couldn’t believe all the issues I had. Just a fluke there. The roof had a partial flat roof which added to the cost as new code says it needs to be slanted a few degrees. Also it already had 2 roofs on it and my front patio couldn’t be salvaged and had to get a new roof built. All these combined added around 5k to my estimate. I probably should have known something was up with the septic/plumbing for the 3rd bathroom. The sink was completely removed from the bathroom and that should have been a red flag for me to dig into further. Lesson learned here is that if you hear a voice in your head saying something is probably wrong then listen to it. I accounted for the holding costs in my budget which were just power, insurance and interest on private loan. This is very important to include in your budget though as it can be a really big number if you have a large hard money loan. I saved about 10K or more doing the work myself I figure. I would say if I had a Rockstar contractor I could have saved maybe a month in the timeline and if it was a bad contractor lost a month or three. So lets call that one a wash timeline wise. However I will never do that much work again. Good learning experience but working 80-100hr weeks for 4 months is awful.

Refinance: My ARV was around 20k lower than expected. But after re-evaluating my expected ARV I agree with the ARV I got. At the end I left 42K in the deal after all loan fees, interest payments and rehab costs. I cash flow really well at over $300/month. I have 60K equity in the deal, 210K appraisal

Final Post, with numbers, April 17th, 2020

Time for the final numbers post. Cashflow wise I'm doing great. However, I wound up leaving about 20% of ARV in the deal so not exactly a home run there. But I didn't lose money, it was a MAJOR rehab considering it was my first one and as everyone else says I learned a ton. And that is how I would love to wrap up my last post for this rehab. But of course, that's not going to happen. Mr. Murphy and I became really good friends during this adventure and he feels he should have the last word.

Numbers on the day I refinanced and tenants had moved in:
Cashflow = $310/month WOO HOO!!! ($706/month before vacancy, repairs, capex, management fees)
Money left in deal = $42,000 (20% of ARV) Booooooo
ARV = $210,000 (also less than my initial estimate) Booooooooo

And now for Mr. Murphy to bring it all home. When the tenants moved in and I was refinanced and life was good those were indeed my numbers. For about 3 weeks. 3 glorious weeks where I was making money and wasn't getting any phone calls. The cement was ripped up and a new drain line laid without further incident. I had a whole 3 glorious weeks and then bam, we're back to normal. I get a call and the tenants have no water. I kind of knew what it was, I figured the sand filter was full and sent my well guy out to empty it. My well is bringing up very sandy water so I had a fancy (read expensive) sand filter installed. It was supposed to need emptying every 3 months or so and that would eventually trickle down to almost never as the well settled. It has been 3 weeks since last emptied0. Now this filter is about 5 ft tall and a foot wide. When you empty it you empty a lot of sand. Sand that has been pulled up from underground. In florida. On a much more frequent basis than originally planned. Can anyone else see the issue here? Sinkholes people, sinkholes. My very own, self inflicted sinkhole. Hey maybe I can name it if I cause it. Anyway a potential sinkhole was always in my head anyway and now it is for sure a big concern. And apparently not just my concern. As my well guy was emptying the sand my neighbor came out and caused a hard time. He saw all the sand and was also concerned. Happy friendly words like "sue" and "liable" were brought out and things went downhill fast. Long story long I had ANOTHER well drilled. Its fitting really. 3 wells on the property to go with the 3 septic tanks. That was an additional $4,300. Im saying since I was already refinanced and had done my numbers that this is just a very early on CAPEX expense. The well has been drilled and Im finally done with the house.

BAHAHAHAHAHAHHA, done. Never! Literally as I was writing this I got a call from my insurance company. They said that they noticed on my 4-point inspection that one of my water heaters is really old. I said ok, cool story bro, thanks for noticing. Well they would like me to replace it. Huh? Replace my perfectly fine water heater b/c its old? The water heaters were literally the ONLY thing in the house I didn’t replace. Oh well, its one of the smaller 20ish gallon ones. Not the end of the world to replace right? But unfortunately it is. Of course it is. Why wouldn’t it be. The previous owner installed the water heater and then built the closet around it. And in his infinite wisdom he installed a door that is smaller than the water heater! I told the insurance company no. Well I told my insurance broker no. She is going to go back and fight with the company. We will see. I also told my broker that I will change companies before I rip out a closet to swap out a perfectly good hot water heater. This will be my last post. There will always be more but the house is essentially done and I think that’s enough follies for now. Hmmmm, tankless, I could do a tankless!!! No closet ripout. Thanks for the help guys!

Your Friend,
Mr. Murphy

@Ben Schembri the rent cancels out the debt. Although only like 75% of the rent is counted as income. This is why it's important to be cash flow positive. You can actually improve your DTI with rentals if you're cash flowing well.

@Account Closed literally 6 months to the day of purchase. 6mo is the usual seasoning period required. I’m doing traditional financing too

@Account Closed of course pulling out money / getting a loan will reduce cashflow. The point though is to force appreciation during the renovation so that you are able to pull out all the money you put in, still have the required 25% equity and be cashflow positive AFTER putting away money for vacancy/CAPEX/repairs. Sure you can leave all your cash in the deal but that really hurts your cash on cash return

@Breelon Bryant I am just finishing up my first BRRRR and on the refinance part. The idea is to buy a house that will cash flow AFTER the cash out refi. Of course you will cash flow less than a 100% paid off house but if you can pull out all the money you originally put in and are still cash flowing then you just got a house for free. And $200 a month cashflow, a house for free, 25% equity and all your money still in your pocket is a pretty great deal.

Update Feb 19, 2020

Whoever I have wronged to deserve this I am truly sorry. I declare for the whole world to see and hear and read I am truly sorry. Seriously. This is crazy at this point.

Electrical: Ok so electrical is supposed to show up last Friday. I call in the morning to verify they will be there. They say yup, its on the schedule, they will be out, I'll call you later when they are done. I text them around 5 to see whats going on. I immediately get a call from the owner of the company. Lets just say when the owner of the company calls you it's not to tell you things are great, no worries, head on out to happy hour. So I'm talking to the owner. He informs me that not only am I not on the schedule but they had no idea they were supposed to go back out to the house, period. The scheduler / admin apparently was as useful as a one armed man in a clapping contest and she has since been let go. As in within the last 5 hrs since I talked to her. So he apologizes and promises to come out first thing Monday morning. Which he actually did. He also cut me a deal on the bill too which was nice. Amazingly, after only 3 attempts here folks, the electrical is fixed. The hot water tank now has 240V going to it and makes wonderful hot water. Well I am assuming it does as the tenants decided to move in early before I could go back out to the house and verify that the tank now works. But I mean everything else has worked out for me so I'm sure its fine. Right? As of today I have not heard that it doesn’t work though and I'm assuming the tenants are the kind of people who shower at least every other day and would have let me know if they didn’t have hot water.  Now that I am thinking about it if they are the kind of tenants that would not let me know they dont have hot water even better!

Plumbing: here is where things go off the rails, or farther off the rails. So the plumber goes out Friday as well. Still can't clear the line and says he needs to bring the owner of the company out to help him figure out WTF is going on. Now for the people following along at home, remember it’s NOT a good thing when the owner is involved. They come out Monday and decide the house has a THIRD septic tank. What the heck!? A third tank! So I will just empty it and life will be good…. I mean does anyone actually think it would be that simple? Haha, simple. We left simple a long time ago. Anyway no, it’s not that simple. The previous owner poured a pad over the tank access to install a workshop and laundry room. Like I cant even put into words how stupid this is. What was this person thinking? This is some new septic tank system that never requires access or pump out? Bafjdklsa;f jdksla fsd!!!! I remember this little voice in my head when I walked that bathroom in the very beginning saying hmmmmmm, that’s weird that they would completely remove the vanity from this bathroom and run a separate drain for the washing machine in addition to the in wall drain. But then I said to myself self, calm down, I'm sure its nothing. NOTHING I said. Haha. So, back from the squirrel tangent. The fix is to jackhammer the laundry room floor, run a line to the other septic tank and re-cement the floor. The only good news in all of this is that they are going to jackhammer a barren cement floor and not rip up any newly installed tile. This will of course cost a fortune and totally screw up my money left in the deal. But the vodka in me says it's ok and to just relax, which is what I am doing. As of now the job isn’t scheduled but the plumber has the go ahead. I'm just waiting for them to tell me the start date. So more to come!

@Richard A. appraisal comes back this friday. Ill do the final BRRRR numbers then. I was looking good up until the plumbing fiasco.

@Nicholas L. the refi is currently in work. Closing date is 6 months to the day from original purchase date. Haven't had the appraisal yet and that will tell me my final numbers for the BRRRR. Will post when I get them. This is a traditional loan though at 75%LTV

Feb 12, 2020 Update:

I’ve decided to become Buddhist. Clearly my faith in the flying spaghetti monster hasn’t worked. I went out to the house yesterday and literally nothing that I had hoped to be fixed was. The electrician was unable to come out and will now be out Friday. So the wires don’t carry the right current and the hot water tank doesn’t make hot water. The septic tank was successfully pumped out. However I have two septic tanks. Can anyone guess if the correct tank was pumped? I mean of course it was the wrong tank! I just laugh at these things now. I gave the company access to the house to see where the issue was but they decided to just guess instead b/c “they don’t like to enter the house.” And why would they. That means they could identify and fix the issue and check their work. What a horrible idea. They will be back out either today or tomorrow to pump the right one and hopefully that clears the blockage in my one bathroom.  So the poo isnt gone and the drains dont drain.  The renters move in on the 19th though so this will all be fixed by then no matter what! 

@Joseph Konney I actually had all the tiles professionally reglazed.  Same with the tub