Base Hit? BRRRR in process

12 Replies

First, thank you to the BiggerPockets community for all the information offered, resulting in enough reassurance to move forward investing. I found BiggerPockets about a year ago, after attending a local guru 2-hour introduction and realizing that wasn't the right path for me.

The Oregon market is pricey, but our ideal goals are buy and hold rentals. I did some leg work driving for dollars, watching the MLS via Zillow, monitoring Auction.com, and getting educated on BiggerPockets. I found a townhouse condo in Keizer, OR that was on the MLS, but a cash-only purchase. It's an hour away, but we jumped in, using our savings and an equity line of credit.

I certainly took on more than intended and more than I realized. I thought I would have to flip the property, but was able to get enough rent to keep it. It was a great education, but hardly a home run. The kitchen, bathrooms, roofs (townhome and garage), windows, flooring, paint, almost everything is new. I had the HVAC serviced (not replaced) and didn't replace the water heater, because both were in good shape.

Here are the numbers: Purchase with closing costs for $98,000. Remodel and holding costs at $50,000, which I anticipated to be $40k at most. Monthly HOA at $250/mo. Final Rent price: $1,600/mo.

I have not completed the cash out refinance, as I'm waiting for the 6-month mark in a few more weeks, but anticipate PITI to be $1,000/mo. $250/hoa. $160/PM. $80Capex/maint. This leaves just around $100/month cash flow. I'm also self-managing for the time being, which sweetens the deal. I believe ARV will be around $198,000.

If I can finance 75%, that leaves very little of my money in the property. At 70%, that would leave about $10,000, which should be 13% Cash on Cash return annually.

I haven't made many posts here, but let me know what you think. Now onto the Refinance and Repeat.

Good luck to all of you in your ventures.

What are the terms on the cashout refi?

Howdy @Ben Miles

Congratulations on the first one. I stay away from condos and anything having Cash Flow killings HOA fees. Not to say you can in your area. If you get most of your money back and end up with a positive cash flow property, then, consider it a successful deal. I'm sure you learned a lot and will be able to improve on the next one.

Congrats at your purchase @ben miles.
100 bucks a month is not much cash flow and hardly leaves a cushion. Was all that work work 100 bucks a month? I’d sell take that extra equity and move more into a multi family unit. More doors the better look for the Home run they are all over and get a property management company to relieve you from the head aches. I am the ceo of TCM property management and we consistently see people managing their own property trying to save a buck but really they jump over a dime to save a penny anyways good luck my friend

@Doran Summers . Thanks for asking, I haven't completed the refinance as of yet. I am operating on the assumption I'll get 70% to 75% LTV at 5%. I'm hopeful for better than 5%.

@John Leavelle Thanks John. I agree about staying away from condos and the HOA fees, certainly not my first choice. I look forward to better deals and a more scaleable approach. I felt this would get me a start, and it did.

@Chadwick Martin , I agree $100/month isn't going to get anyone rich quick... As a first deal getting back into Real Estate it's a good jumping off point. The final success will probably be defined by how much money I have to leave in the property. I would like my next deal to be multi-family, duplex or greater. The property managers I talked to charge half months rent for placement and 10%/month. $2,720 for the first year doesn't seem like pennies to me, but I'm sure it will some day. If you're seeing home runs that you can't capitalize on, keep me in mind. I am ready to take on more. Thanks for the response and the well wishes. Good luck to you as well.

@Ben Miles good for you on this property. I agree with what has been said in that $100 a month in cash flow might not be a lot if you are managing the properties yourself especially if there is an HOA that can go up and eat into your profits. But the important thing is that you are now in the game.

This year we have done something similar with 11 properties. Our first property was by far our lowest profit property at an estimated 7k each (for my business partner and I) of profit over the next 5 years in cash flow and profit when the leasee exercises the option. Each deal after our first has been a better deal and some have been as high as up to 60k each of estimated profit over the next 5 years. But we had to get past deal number one until we understood better what we were doing in order to move on to doing deals with higher profits.

One other thing about your property is you may want to also consider vacancy costs and cap-ex savings if you plan to hold onto the property as a long term rental. That might eat up all of that $100 of profit each month.

@Ben Miles

As you move forward towards your next and future BRRRR deals try to obtain the pre-approval for your Refinance loan prior to the initial acquisition of the property. This way you know you have your exit strategy in place. You also have a clear idea what your interest rate/terms and seasoning requirement will be. It definitely lowers the stress level for you. It is also reassuring to your Hard/Private Money Lender.

@ Ben miles look for another management company we charge 8 percent but having a good management company is crucial to your team and my friend there are Home runs everywhere you just need to know where to look and get the right people sending you deals most of my good deals are off market

Also I’m selling two duplex’s in Salem both will cash flow you over triple your last investment if your interested

Thanks @Shiloh Lundahl . I'll keep working to improve.

@John Leavelle , what's the process for achieving pre-approval? I didn't know that could be an option, so thanks for the heads up, I'll certainly look into it.

@Chadwick Martin , I tried sending you a private message, but I'm not positive it went through. Of course I'd be interested in learning more about duplexes you may have available. Keep me in mind regardless of your timing.

@Ben Miles

I apologize. You first get Prequalified with a Lender (For the first couple deals) anyway. They will provide a letter summarizing your loan limit, term, interest rate, and projected mortgage payment. They do everything except a hard inquiry on your credit. So when you are ready for the Refinance loan it is just a matter of updating and finalizing the numbers. And of course they do a Hard inquiry. As long as you have no major changes in your credit or DTI then all is good. There is the possibility interest rates could change.

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