Potential Long Distance BRRRR

9 Replies

Hello All, 

For a long time now (probably 4 years) I have thought, analyzed, questioned, listened to all BP Podcasts, etc. in hopes to make the jump. I am in an expensive market (Sacramento area) and I am from Goliad, TX. Near there is a city called Victoria that I am looking to get into. I married an amazing woman who also loves the idea of real estate, but we are back and forth on this and thought we would reach out for some help from people who may have actual experience. 

Opportunity Outline:

Asking Price: $110,000

On market for 180+ days

ARV of roughly $133,000

Rent for $1300-1,400

Approved for loan at 6% with a 6 month seasoning period. 

Repairs of about $15,000 (Texturing some walls, replacing all flooring, maybe new cabinets, one wall will need sheetrock installed, some new sections of hardy plank on the exterior, painting the exterior, some work in the bathroom such as painting and flooring)

Our realtor claims that the selling agent won't budge on the price. Although the sellers may "just pull it off market and rent it out themselves if it isn't close to asking price." I find that weird considering the listing agent would then have nothing to gain? This is also a property of a recently deceased mother who has left it to her kids. 

Questions:

Is my renovation budget realistic assuming that should I have to, I can fly there economically to do a lot myself (including demolition and flooring and maybe walls)?

My agent is claiming that offering less than asking isn't worth it. Am I wrong in telling her to just go in where I am comfortable given that it has been on the market so long? I am wanting the property for $100,000.

Side notes:

- I have family there and would leverage that (a little) when it comes to staying there when needed to do repairs, and also having them help some. 

- If you feel like really having fun, here is the listing https://www.redfin.com/TX/Victoria/119-Avant-Garde-Dr-77901/home/142027202

Thanks Everyone!!

Brooke and Nate

@Nathan Gruetzmacher I somewhat agree with Caleb and somewhat don’t. Deals are based on return expectations which vary from person to person. For someone just starting out and less than 1mm net worth I would agree. Someone over the 5mm net worth and high income I would probably green light it.

That being said, I’d tell her to write the offer if you’re confident in your numbers. It’s literally her job and how she makes money. If she doesn’t want to, she’s not the right agent.

From my experience in working with out of state investors using the BRRRR method in Memphis, you would have to get this property at about $80k to make sense with a small budget of $15k to remodel. If you're estimating a $133k appraisal, then at 70% you would only get about $90k back.

My question is with your calculations and what you're willing to spend ($115k) you would be leaving about $28k in it after the refinance. Why not just buy a rent ready property for $135k with 20% down which is about the same cash you'd be leaving in your BRRRR?

BRRRR is a great strategy, but from my perspective, the whole point of it is to walk away from the refinance with most of the cash you invested so you can repeat.

Not trying to discourage you, but I would be patient for that deal that has you all in at no more than 80% of the appraised value.


Best of luck!

@Jonathan McGee Thank you for this helpful insight! You are right in that it isn't the most desirable BRRRR property. We had just gotten to the point where we were saving a lot of money, and not getting the FULL cash back wasn't going to kill us necessarily. Kinda wanted to take the plunge to get something in and get the experience. I think the better option for finding a deal like that would involve Direct Mail Marketing and trying to find a motivated seller off market. Apparently We Buy Homes is hitting that market pretty hard already with that.

@Nathan Gruetzmacher I can understand that! Having the cash but not the deal can leave you itching haha! I would definitely use this opportunity to get hands on with direct marketing as that is where 90% of the deals are found. You can easily take $500, pull a few different lists and send out some mailers. You'd be surprised how fast you get a few calls. I'm sure there has to be a few reputable wholesalers in that area, it doesn't look far from San Antonio. You've actually got me interested in this little pocket!

@Jonathan McGee I will likely use that method. I have used DMM in the past with a company I partially own near there and it led me to double the customer base. It's amazing. But I was just blasting that out to zip codes and it didn't need to be targeted past that point.

It seems to be a decent market. I was very doubtful of it at first just because there is such high inventory and I feel like Victoria isn't going anywhere too quickly. But I know someone there that has had great success in renting renting out about 8 in the past 2 years. They won't appreciate there like other places, but it seems like a place to get homes pretty cheap if you find the right person, and to get pretty high rents.

@Nathan Gruetzmacher I think Victoria might be an interesting market. I would assume less competition than in San Antonio. I agree that this is a marginal deal. But I would make the offer you are willing to pay or you’ll never know. And I’m not a big fan of getting in the habit of swinging hammers. Sometimes it’s just false economy when finding a good contractor would cost a little more but get cash flowing sooner.

Good luck getting started!!

@Nathan Gruetzmacher

I'm originally from Yoakum and still have a lot of family in the area. I like Victoria and the surrounding area for the potential, but I'm currently investing and working in San Antonio because of the steady growth.

As a licensed real estate agent and a general contractor, I would pass on this opportunity and find a different real estate agent if their advice is to offer asking price. Your price should always be based on the numbers and not what a seller or agent thought the property was worth.

Feel free to reach out to me anytime if you ever need any help in the area.