Hi Everyone! Excited to share my success story and lessons learned during my first BRRR and second investment property. Hopefully, everyone can learn from it!
Here are some lessons learned during my first SFH BRRR in Dallas-Fort Worth.
Purchase Price: $102,000
Total Cash out of Pocket: ~$25,700
Estimated Cash on Cash Return: ~16%
PTIT Cash Flow: $500
Monthly Cash Flow: $339
(Vacancy 5%, Repairs 6%)
- It's all about the deal- I put in so much work to "prepare" myself for the purchasing of the property. I wanted to make sure I had everything lined up perfectly. Team built, property management paperwork etc. I spent a couple of months getting ready to be a real estate investor. Then, I began searching for the deal and it took much longer than anticipated. My advice is to not worry about everything else-just go after the deal. Identify the critiical items necessary to purchase the deal. After you secure the deal, figure out the next step. Take one thing at a time and the very first is finding a deal.
- Cast a WIDE net. Tell everyone you're looking for a property, wholesalers, REI contacts, agents. Don't just depend on a couple of sources.
- Had to put down $5K non-refundable deposit to secure the property to closing with hard money. Be prepared to HUSTLE. Had to make a quick decision and get the money quickly to get the property. It all comes down to being consistent about analyzing deals, then once you get the hang of it, you will be able to quickly analyze and make a decision.
- After closing on the property with hard money, I had two weeks before closing. It took a significant amount of time to get contractors out there to make a bid. Do this as quickly as possible. Also, would recommend scheduling the contractor to walk through it with you. Each contractor had many questions as to what I wanted to do with the property and therefore created unnecessary back and forth communication. After closing hard money the two critical pieces were securing a rehab bid and getting insurance.
- Closing with hard money happened at 75% ARV with Hard money. Refinancing on the back end would be 75% as well. Cash out of pocket at closing was 11,000. Will incur closing costs on the back end because of hard money financing at 75 rather than 70%.
- Multiple Bids allowed me to compare and contrast what exactly needed to be done to the house and gave me reassurance that pricing was good. Especially for a new investor this is really beneficial.
- Additional Repairs add up quick over time. Stick with the rehab plan and don't upgrade-It's just a rental! I upgraded on several features I should not have: A/C, painted the garage, textured ceilings. These upgrades will help if I ever need to sell the house, but significantly lowered my CoC return.
- I probably could have stretched the water heater and A/C a couple of years, but wanted to include it with the rehab and BRRR. Figured it would cost me more down the line. No way of really telling if that was the right decision or not.
- Permits. Part of my up front due diligence that I did not do well was ask the city if permits had been completed. Of course, luck would have it-there were no permits. I'm not sure what I'd have done if I found that out up front. I think I'd have still bought the property, just added the permits into my budget. My contractor was able to get a mechanical, plumbing, electrical, and remodeling for around $2K. This cost along with additional repairs really hurt the expected cash flow.
- Property Management
- Managing it myself
- Required Rental Insurance
- Sites that brought me leads:
- Zillow Rental Manager (Zillow, HotPads, Trulia)
- Cozy (Doorsteps, Realtor.com, Cozy)
- Zumper (Realtor.com, Walk Score, Padmapper)
- Do no use Rentals.com
- I paid $50 for a month and got zero leads.
- Phone Screen is important, do not show the house to anyone you do not think would make a good tenant.
- Pricing made a huge difference when renting out my property, if you are not getting enough leads/interest, lower the price to meet the demand.
- I originally posted for $1375 and had a few showings then shifted to $1345 and my phone was ringing of the hook.
- Currently, refinancing out of hard money 2 months afterwards.
- You can start the refinancing process when complete with the rehab and it will take 30 days from there, unfortunately. I did not project this well on my analysis-was unsure as to the timing/process of it all.
While the Cash flow did not pan out as well as I had projected, I took action and now have learned ALOT more than continuing to "educate" myself. There's probably more, but that's all I came up with for now, hope it helps!
Excited for the next opportunity!
Thanks for sharing!
Thanks for sharing, and the best way to learn is exactly how you did it, jump in. having someone else with some experience does help but doesn't always sink in until you do it yourself. as far as the mechanical equipment, yes you may have gotten a couple years out of the ones you had, but now that you have new equipment you do not have to worry about those for another 12+ years. that's the first thing i look at with houses and figure on replacing as soon as i purchase the property, depending on how old it is.
congratulations @Stephen Quesinberry
thanks for sharing and keep hustling !
Awesome write out and good CoC return! My wife and I are looking for our first BRRRR right now so this was really helpful and inspiring for us to just do it.
Congratulations!! You are right on- it is a mindset to take the leap. And always good to have reserve $$ for those unknowns that can come up from time to time.
Were you happy with your hard money lender?
Great luck to you!
@Stephen Quesinberry thanks for sharing! If you dont mind, what was the gross rents and where in Dallas Fort Worth did you purchase?
@Erik Drentlaw purchased in Watauga which is just north of Fort Worth. I set rent at $1345 after having listed at $1375 for a couple of weeks.
@JOHN DE SOUZA yes, on hard money lender. Had a couple of referrals to Investmark Mortgage. Great people and easy to work with. 14% and 3 pts (1 on the front, 2 on the back). Willing to pay the little bit extra to work with someone I trusted especially on the first.
@Torin Murphin awesome! Best of luck, reach out if you have any specific questions, I can help with!
@Stephen Quesinberry Congrats and thanks for the info. I am currently a hard money lender and charge all my points on the initial closing but have been seeing alot more lenders shifting to points up front and on the back end. Did you find that to be more beneficial?
@Alex Correa ; in this particular situation it didn't make a difference. The hard money loan was 75% LTV as was the refinance. If the hard money was 70% LTV then it 'd be easier to "hide" it on the back end.
Good job - and a nice write up. You have made a really good point that all potential investors should listen to - After all your preparation and research, the one thing that mattered was that you took the BIG step and bought a property - I am amazed at how many would be investors spend YEARS preparing, paying for guru courses, etc because they are afraid of the unknown and can't bring themselves to roll the dice - Good for you and welcome to the game!!
Thanks @Jeff W.!
@Stephen Quesinberry Congrats! Deals in DFW are getting tough to find, but they are still out there. Looks like good numbers for a long term hold.
Thanks for sharing Stephen. Great stuff and congrats!
If you don't mind me asking, where in DFW did you invest?
I am about to rent my primary house in a month or so and the advise I am getting from my experienced realtor is to post the rental price within the rental comps of the area and not go beyond. Kinda of what you have done with your SFH.
Also, where do you find good contractors and Handymen?
@Stephen Quesinberry : Congratulations on your success and a great write up.
@Andrew Herrig thanks! Yes, it took about 2-3 months of watching the market for a deal. I would imagine the wholesaling has slowed down for you a bit?
Thank you @Ankith Chandra !
@Asem AbuAwad , yes, I would tend to agree on the rental price that your realtor suggested. However, if you are willing to hold out to get top dollar, it's possible. Just be expected to have a vacancy period especially in the Nov-Dec time frame.
For myself, I really wanted to get someone in as fast as possible. I knew the closer I got to Thanksgiving/Christmas the smaller my qualified applicant pool would be. As soon as I realized I was on the high side with my rental price, I didn't waste time and lowered it to get more interest.
@Asem AbuAwad , oh and the property is in Watauga.
Nice job @Stephen Quesinberry !!
Who did you refi with?
Hey @Stephen Quesinberry , how did you run your analysis? How did you come up with that ARV/rehab costs? I find myself struggling with estimating ARV/rehab costs and therefore what the purchase price should be in a BRRRR. I'm also not sure how to quickly screen a property and know if it's worth analyzing any further. I guess what am asking is, how did you determine it was a good enough deal to make an offer... what was that process like for you? Thanks!
@Stephen Quesinberry how did you find this deal? MLS, wholesaler?
@Chance Housos refinanced with KBS Lending. Highly recommend.
@Stephanie Soltero ; Got it through a wholesaler. You're not alone, that is a difficult aspect to analyzing deals. Many of the larger wholesalers will provide an ARV and a rehab estimate, which is generally in the ballpark. I use that to quickly do a "Screening"-if I find something that stands out. Here's how I approached it:
Phases of Screening:
1. "Sniff Test": Ballpark rehab, ARV, and rents. Soon you will be able to do this without a spreadsheet. (5-10 minutes) Should be able to look through and scan dozens in a couple of hours.
2. Phase I: More detail, ask an agent for comps, ballpark rehab, get property tax from assessor, 20-30 mins
3. Diligence: Evaluate area, schools, other factors in purchasing investment
4. Offer: Visit house and verify rehab is what is estimated, make offer, put down deposit.
Stephanie, this is how I approached it. It's not easy, but hopefully, it gets you evaluating many properties in order to be able to move quickly when the opportunity is right.
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