BRRRR in Seattle, Washington (with before/after pics and numbers)

BRRRR in Seattle, Washington (with before/after pics and numbers)

Investor · San Jose, CA, Bellevue, WA · Member since 2016 · 327 posts · 257 votes

I just finished a BRRRR just outside of Seattle, Washington. This deal had all sorts of complexity. It was an out of state deal (I live in the SF Bay Area), where I 50/50 partnered with a contractor, and got a private money loan before the cash-out refi. I'll walk through details (including pictures and numbers) below....

Purchased a short-sale property on 3/3/2017 for $218k. 

I had been flying up to seattle 3 weekends in a row looking at properties without luck, then this place came online on the MLS on a thursday with listing notes saying offers must be in by end of day friday to be reviewed on Saturday. We had under 36hrs to put in an offer so I had my agent swing by and we did a facetime video tour. That was good enough for me so we submitted a cash offer. List price was $169k, we offered $190k cash no contingencies. Saturday morning comes around and we were 1 of 11 cash offers. Selling agent kicked offers back 3 rounds, we came up and up and eventually got the deal. Its a 3br,1ba small, single story, SFH. We estimated $40k rehab and a $320k ARV.

Partner and loan structure: 

  • Private money loan for 90% of purchase price
  • Contractor partner and I each paid another 5% of the purchase
  • Contractor partner and I split rehab costs 50/50
  • I handle project management / design / financing / finding the deal/etc; contractor partner handles doing most of the rehab work (we subbed out plumbing/electrical and hired day labor for help with roof/paint/landscape/etc) (this is the 4th deal my contractor and I have worked together on, but first time being partners)

We spent 

  • $218,000 purchase
  • $41,500 on the rehab 
    • total gut + permitted electrical service change, plumbing, roof, landscaping/etc
  • $4,000 on holding costs
  • All in at $263,500
  • Estimated sale price if we were to list would be $330,000 
  • So we would net around $306,900 (7% to sell) minus  $263,500 = $43,400
  • Divide the above by 2 since my contractor and I partnered, we'd each net about $21,700

I went back and forth about selling vs BRRRR'ing and settled on the BRRRR since my long term goal is to get to 10 cash flowing properties, so I offered to buy out my partner from the deal, he was happy with that, so adding that to my costs, my total investment comes out to $285,200

I got an 80% loan on the new $330k ARV which allowed me to get back $265k, which means I net net DID NOT get all my money back out (very hard to do in seattle), and thus end up leaving about $20k of my own capital in the deal. So I have 20k invested in a $330k property with a $265k loan at 4%.

We're expecting it to rent for $2,200/mo. My holding costs (including maintenance/insurance/tax/etc) is right around $1800/mo

Here are some before pics; place was a dump! We had to wear masks for the first couple weeks

We spent 2 weeks simply on the demolition. Total project end to end took 14 weeks. I got the team custom T-shirts for moral! 

goodbye kitchen!

Had to mop the grease off the ceilings before we could prime! Ended up replacing a lot of drywall. 

bathroom in progress

Laser perfect

322sq ft deck!

And here are the final pictures....

My business partner and I on the last day!

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Investor · Los Angeles, CA · Member since 2016 · 577 posts · 240 votes
9y

Christian. I grew up in the Bay Area. Love your story and what you have done up in Seattle. I have been doing BRRR's for the last year in Memphis and Cleveland. Would love to connect and learn more about what you are doing and see if we can maybe do something together in the future. Great work!

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  • Investor · Los Angeles, CA · Member since 2016 · 577 posts · 240 votes
    9y

    Christian. I grew up in the Bay Area. Love your story and what you have done up in Seattle. I have been doing BRRR's for the last year in Memphis and Cleveland. Would love to connect and learn more about what you are doing and see if we can maybe do something together in the future. Great work!

  • Investor · San Jose, CA, Bellevue, WA · Member since 2016 · 327 posts · 257 votes
    9y

    Thanks @Antoine Martel, getting together would be great. 

    This is my 2nd BRRRR in Seattle. I'm focusing on higher quality areas / renovations / tenants, with the thought that those will appreciate the most in the long run.

  • James WachobBusiness Member
    Real Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 888 votes
    9y

    @Antoine Martel have you met Antoine?

  • Real Estate Agent · Fort Collins, CO · Member since 2016 · 246 posts · 142 votes
    9y

    Hey @Christian Wathne, your place looks great and congrats! What part of Seattle? I lived in Bainbridge a few years ago and I remember seeing a lot of potential in the Bremerton/Tacoma area but I know the whole Puget area is experiencing a ton of growth.  The area is so similar to the bay with the tech boom/lack of room to build on because of the water.  Leaves a lot of opportunity for gentrification and appreciation.

    @Antoine Martel I grew up in the bay too, small investing world, huh. I'm doing BRRRR's in Memphis too, you'll have to tell me how you settled on Memphis and Cleveland!

  • Investor · San Jose, CA, Bellevue, WA · Member since 2016 · 327 posts · 257 votes
    9y

    Thanks @Jennifer Slaughter, yeah, crazy growth and low inventory; it's getting more and more difficult to find deals to work with. 

    This property is in Renton. 

    We may have to start working further south to find deals that pencil out, but I'm for now I'm focusing on being within 30min of downtown seattle & bellevue 

  • Real Estate Agent · Fort Collins, CO · Member since 2016 · 246 posts · 142 votes
    9y

    @Christian Wathne, I'm sure it's becoming more competitive but you guys are doing great work, keep it up

  • Homeowner · Everett, WA · Member since 2017 · 8 posts · 10 votes
    9y

    @Christian Wathne Wow great looking bathroom. I like that center piece right in the center of the bathtub wall. What is that?

  • Investor · San Jose, CA, Bellevue, WA · Member since 2016 · 327 posts · 257 votes
    9y

    Thanks @Pang Poeng! It's tough to see the depth from that bathroom picture, but its a 1ft x 3ft recessed shelf (same size as the window above it)

  • Investor · Boerne, TX · Member since 2015 · 139 posts · 71 votes
    9y

    Congrats on the project. Who says deals can't be found in high priced areas? I hope to get my first BRRRR under my belt this year. Two questions; how long did you have to wait to refi and did you use a local or national lender?

  • Surveyor · Hemet, CA · Member since 2015 · 797 posts · 112 votes
    9y

    @Christian Wathne what a great job! I am looking to do this as well. I am trying to build a team of cleaners contractors painters floors guys workers in general. I will have Capitol to invest into homes like these were do you suggest I start? Zillow Red Fin? I am looking for dumps like these to make money on the buy! Thanks for any tips or insights!

  • Architect · Seattle, WA · Member since 2017 · 160 posts · 81 votes
    9y

    @Christian Wathne great post, good to see some local examples with this market feeling so tight for newcomers. What was the overall timeline on this renovation? (math would say 4 months but not sure what the delay from finishing the renovation and this post is) and did your contractor partner do the work at cost? I'm in the building industry (architect) in the area and have been trying to get my head around actual renovation costs vs what I'm getting out of "cost vs value" charts and the like. 

    I'd love to connect next time you find yourself this way to see if you'd be interested in doing something together / sharing some insight.

  • Asheville, NC · Member since 2015 · 83 posts · 19 votes
    9y

    @Christian Wathne

     Wow, what a transformation!  Love, love, LOVE the kitchen!!  Nice job Christian.  

    @Pang Poeng

    @Pang Poeng 

    Pang, they call that shampoo niche.

  • Lynnwood, WA · Member since 2017 · 5 posts · 0 votes
    9y

    Did you paint those cabnets?  They look great!

  • Investor · San Jose, CA, Bellevue, WA · Member since 2016 · 327 posts · 257 votes
    9y
    Originally posted by @Steven Gillmer:

    Congrats on the project. Who says deals can't be found in high priced areas? I hope to get my first BRRRR under my belt this year. Two questions; how long did you have to wait to refi and did you use a local or national lender?

    The refi was the toughest part of this deal; in particular because I had originally planned for this to be a simple flip so had not thought ahead on the financing. The decision to make it a BRRRR was late in the game.

    I was finding from other lenders (all national) that I could either only refi the original purchase price, or I would have to wait 6 months then be able to refi 75% appraised value, neither of these were great options. My entire project was 3.5 months, so I ended up going back to my hard/private money lender and showed them the breakdown of the 2 options (either flip or hold) and asked if they would be on board with signing a new, longer term (1yr) loan at a lower rate. They were on board with this, so I paid off the higher rate short term rehab loan with them and re-signed a 1yr at a lower rate with a slightly larger balance. 

    Sometime within the next year I'll have to do a new, more permanent, cash-out refi, but when that time comes I'll have a history of paying tenants and good seasoning. 

  • Investor · San Jose, CA, Bellevue, WA · Member since 2016 · 327 posts · 257 votes
    9y
    Originally posted by @Robin Boyer:

    @Christian Wathne what a great job! I am looking to do this as well. I am trying to build a team of cleaners contractors painters floors guys workers in general. I will have Capitol to invest into homes like these were do you suggest I start? Zillow Red Fin? I am looking for dumps like these to make money on the buy! Thanks for any tips or insights!

    Heck yeah! I'm certainly not the expert at finding deals, but my experience is that in Seattle, even non-livable condition homes are on the MLS. I've reached out to many wholesalers looking for deals with zero success, so all my deals have come from the MLS. I like redfin, I believe they get listings often quicker than zillow. The real place I find deals though is from my Windermere Broker. I let him know very specifically my criteria and he pre-filters deals for me.

  • Investor · San Jose, CA, Bellevue, WA · Member since 2016 · 327 posts · 257 votes
    9y
    Originally posted by @David Edwards:

    @Christian Wathne great post, good to see some local examples with this market feeling so tight for newcomers. What was the overall timeline on this renovation? (math would say 4 months but not sure what the delay from finishing the renovation and this post is) and did your contractor partner do the work at cost? I'm in the building industry (architect) in the area and have been trying to get my head around actual renovation costs vs what I'm getting out of "cost vs value" charts and the like.  

    I'd love to connect next time you find yourself this way to see if you'd be interested in doing something together / sharing some insight.

     Thanks David!, yeah nearly spot on; we came in right about 3.5 months from beginning to end. My contractor partner worked for 'free' with the contract that we were splitting profits 50/50. We subbed out plumbing/electrical and brought in day labor to assist with fence/landscaping/painting/roof/etc, but contractor partner did all the work for no money up front. We shared costs 50/50 and kept track of all expenses using an app called 'Receipts by Wave' which allows receipts to be uploaded and categorized in a nice organized way. We'd sync weekly on expenses/timeline/future costs/etc so that there were never surprises on either end. 

    I'd be happy to meet up and talk business. I can show you our detailed costs breakdown by category and help you get a better feel for estimates. 

  • Investor · San Jose, CA, Bellevue, WA · Member since 2016 · 327 posts · 257 votes
    9y

    Thanks @Shirley Gregory! 

    Thanks @Julie Anderson! We actually bought the cabinets that color from a place in sodo called 'Pius'; let me know if you're in the market to purchase I can get you connected

  • Lynnwood, WA · Member since 2017 · 5 posts · 0 votes
    9y

    thank you,  will do.

  • Architect · Seattle, WA · Member since 2017 · 160 posts · 81 votes
    9y

    @Christian Wathne Sounds great! PM me next time you are in town.

  • Rental Property Investor · Albany, NY · Member since 2016 · 2 posts · 0 votes
    9y

    @Christian Wathne Is the cost associated with your initial private money loan included in your holding cost? Just curious on that process. Overall a great deal. Congrats. 

  • Seattle, WA · Member since 2017 · 1 post · 0 votes
    9y

    Looks great!

  • Fremont, CA · Member since 2017 · 3 posts · 0 votes
    9y

    @Christian Wathne, awesome job. I want to know about the private lending part. How did you find the lender and what do they look for lending 90% on a run down property (initially) like this?

    Really inspired and hope I can pull off something like this....

    Congrats!! :)

  • Fremont, CA · Member since 2017 · 3 posts · 0 votes
    9y

    did you rent it yet?

  • Investor · Chicago, IL · Member since 2017 · 22 posts · 6 votes
    9y

    If this is a dump I'm in huge trouble. I needed 3 20 yard dumpsters just to empty the flea infested contents left behind in what I bought. Not even talking any demolition. Also accomplishing in 3 months....wow. The city of Chicago went back and forth with my architect for nearly 3 months before giving me permits a few days ago.

    Lovely finished product!  Congrats to you. Hope you rent it soon if you haven't already.

  • Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
    9y

    congrats on the BRRR. Market is very competitive it appears. Super slim margins, but if you can float it, should be worth a lot more in the long term. Factoring in PM, maintenance, vacancy and cap ex, may have negative cash flow until rents can catch up. Maintenance and cap ex should probably be low though since you guys gutted the place.

    The rehab looks really good. 

    Is your all in counting points and interest paid to HML? If so what were the rates? <4k for 190k loan is amazing

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