How I got a ridiculous 56.7% cash on cash return using BRRR

14 Replies

I bought a duplex last year in Chattanooga off of the local MLS for 58K and spent about 26K doing a rehab on the property. When I bought it someone had hit a brick wall with a truck and the resulting hole was covered by plywood. It needed all new flooring, windows, painting, HVAC and appliances but I was able to turn it around in about 2 months and get it rented for 775 and 700 for a total monthly rent of 1475.

I was all in at 86K we got it appraised at 95K (which i think is low) the local bank I work with agreed to refi up to 80% of appraised or 90% of cost which ever was less, in this case it meant that I was able to pull back 76K which meant I only left in 10K.  

I am easily cash flowing more than $200 a month per unit.  

Rents are $17,700  with tenants paying their own utilities and total costs are $12,030 including the mortgage payment.

(10% management $1770, 5% vacancy factor $885, maintenance $885, lawn care  $900, 10 % Cap ex $1770, Payments $5820)

This leaves $5670 dollars a year in cash flow for a ridiculous 56.7% cash on cash return!  It wasn't super easy but it also wasn't that hard.  Deals are tight but they exist and this can be done.  

Thanks so much for posting the information and numbers you had on this duplex! That sounds like it worked out amazing. I have been wondering what local Chattanooga investors are putting down for vacancy and management rates so I found this super helpful!

Originally posted by @Quinlan Canary :

Thanks so much for posting the information and numbers you had on this duplex! That sounds like it worked out amazing. I have been wondering what local Chattanooga investors are putting down for vacancy and management rates so I found this super helpful!

 I'm glad it helped.  Vacancy varies of course and I self manage so I actually do better than these numbers show but I think 10% is a safe number for management

I like the brrr strategy, but it can lead to some odd COC return numbers. If you can refi and pull out more than your initial cash outlay, what is the COC return? Glad it is working out for you.

We call that an infinite return and those are the best

@Jeffrey Holst what bank did you work with in Chatt? Did they give you a good interest rate? I just started a refi on a 5-plex in chatt but the interest rate for me has gone up to 5.5%

@Ryan Stahr I used Southern Heritage Bank and the rate was just under 5% however this wasnt in last month and rates are climbing.  

Love it!! Those are great numbers and sounds like you kept a big picture perspective the whole time. I’m doing a mini version of a BrRRR - r for small rehab :) on a fourplex and it’s amazing how people are so surprised I’m paying cash up front and the return is low, blah blah blah and they just don’t seem to ‘Get It’ that 6 months down the road I’ll refi and move on to the next one!

@Mark Hughes exactly. It worked out well for me. I don't always use BRRR but when I do I make insane returns over the long haul.

That could be the next Dos X commercial about the most interesting investor in the world!!

Great numbers, indeed! Not a biggie, but did you factor in the refi fees?

@Jeffrey Holst Hey Jeff, these are superb numbers! 

Duplexes aren't bad after all and yes you are right the deals are still out there (the MLS is still delivering).

Congratulations! 

@Victor S.   I didnt on this example but the fees were rolled into loan so the cash on cash return is the same.  

Well done Jeffrey!

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