So I'm in the middle of my first BRRRR project in downtown Wilmington, NC. Bought from a wholesaler for 60K 3 months ago, after closing costs, new roof, cleanup and junk removal and some brick work I'm in it for 70K
The "scariest" issue was a broken main beam in the super small crawlspace. After getting a few outrageous estimates, I youtubed it, bought a giant 6"x6"x8' steel angle iron beam, and got under there and fixed it myself. Nasty work!
Anyways I get a cold call out of the blue from some wholesaler asking to buy it, I say make an offer. At first they say 80K and I say no thanks. They soon come up to 100k which, after hesitating, also declined.
I figure after short term capital gains taxes I would only walk away with @15-18K. The house is a major rehab, looking at 75K more to complete but when it's done ARV should be @ 215-225. It will be a legal 4/2 and a good cash flow property.
I don't need the quick bump of cash, my long term plan is to buy and hold, do 2 BRRRR's a year for the next 10 years and should be retired. Plus my wife has a high earning W2 job and we would get killed with taxes on the profit.
My hesitation is that since this is my first MAJOR rehab, I'm worried some major problem will come up. Admittedly, when I bought it I used an estimating software and so far the figures are matching pretty closely.
I know that if I want to do 20 of these, I need to quit being wishy washy and don't even let the thought of selling right now enter my mind. I guess this post is just to vent! I am very bullish on Wilmington/ southeastern NC, as we have the highest ratio of people moving in vs. moving out in the country, good weather, low taxes, beaches and water on 3 sides so sprawl is limited.
Thanks for reading and any advice is appreciated.
@Matthew Wilson it really comes down to your plan and goals. You said you'd get killed on taxes - so it would have to really be worth it to sell it right now. There is always risk in going into a huge rehab but you know your market and potential margin (which looks very solid) from a BRRR. Will the property cash flow after you refi at the 215k-225k level?
It has the potential to be the "perfect" BRRRR(get all my money out or even pocket a little money) if I keep my total costs to below 150K, there are smaller comps on the same block that recently sold for over 200k so I think I'm being relatively conservative about the ARV.
It should rent for @1350-1400, so cashflow about 450-500. It will be new top to bottom so hopefully lower repairs/capex.
My wife's job covers our living expenses, so my goal is really long term cash flow with decent, middle of the road houses. This one fits the bill so I"m confident I'm making the right choice to keep it, it's just an odd feeling turning down money! "A bird in the hand...etc etc."
Yep, I totally know what you mean. Trust your numbers (as long as you've overanalyzed and done plenty of due diligence). It sounds like a great deal! Goodluck with it! I love BRRR investing
@Matthew Wilson dude this fits your longterm goals. Fix/refi/hold. It also has a huge ARV cushion which is ideal to cut your teeth on. If you can successfully capture $50k+ in equity and cash flow $400+/mo that's a home-run and it's tax advantaged income. Hold the course!
@Matthew Wilson , anyone trying to take this off your hands for anything less than full retail value is being a Pied Piper. ie. They are trying to deprive you of the full benefit of the fantastic deal you achieved yourself, in order that they may make a profit from what they deprive you of.
ie. I'm just reminding you that you don't have to make the same mistake as the person who sold it to you. Cheers...
Congrats on getting a great deal in an awesome area! We are BRRRR investors in ILM as well and the fact that you got such a great deal, are in line with your renovations budget and your comps are good is killer. If this project still fits your goals, I would encourage you to stay the course. Reno's are lots of work but this one project will give you even more skills and confidence to do the other ones you'll need to meet your total target and that's a piece of the return that another offer can't provide you.
This happened to us on some of our recent deals and I had to ask myself if we were trading something we really wanted (good cash flowing properties in a good city) for something we didn’t really need (small bump in cash).
You got this!
If your numbers are right, I'd definitely keep it as a rental. Being able to get all of your money out of it and cash flow 450-500 a month is great.
Anyone cold calling you with offers isn’t even offering you what it is worth now. Those are people looking for extremely discounted deals. You negotiated them up some, but I bet you could still get 20-30% more as is just having it listed.
@Matthew Wilson I say renovate it and then brrrr or sell if needed. going through the renovation process is what is going to get you to the next level even if you don't hit your numbers.
@Matthew Wilson , as others noted if building a portfolio of rentals is your goal, this gets you closer. And I agree that finding a BRRR that actually works from both the refi and healthy cash flow perspective is rare these days. You also make a good point that you are not profiting $30k, but rather $15-20k after taxes.
One factor that I think about when analyzing the sale of my properties is how many years of cash flow will I have to hold my rental to match my profit from sale, and combine that with, are there other opportunities where I can place that cash and make a better return.
First, I love the fact that you are being scrappy and getting your hands dirty, which is paying off really well.
Isn't it fascinating what one can learn by watching YouTube videos?!!!
If you were initially planning on the BRRRR method, I think you should stick to it because if anything breaks in the nearest future you will just YouTube it and fix it anyway.
Trust your process!
Definitely BRRR. Selling to wholesaler means you still have tons of value and you'd be tax inefficient.
You got the offer from a wholesaler so I wouldn't say its a "real offer".
He might try to offer you anything hoping to tie you up.
If he has an end cash-buyer, you get the $100,000, he makes money and everyone is happy
If he can't find an end buyer, your property is tied up for 1 month
Thanks everyone for the words of encouragement! I'll be moving forward with the BRRRR as planned.