Lightning Strikes Twice - Two Successful Side-by-Side BRRRR's

46 Replies

I am happy to report that the final numbers are in from our first TWO successful BRRRR's (Buy-Rehab-Rent-Refinance-Repeat).

Who says lightning doesn't strike twice? These were two half-houses (left and right side of a building - we now own the whole building) that we separately purchased, rehabbed, rented and refinanced.

We bought the first property (Left Side) off the MLS and began rehabbing (we found a great contractor who did all the work). The rehab took about 10 weeks. About 3 weeks into that rehab, my contractor texted me that water was leaking into my property from the other house (Right Side). Even though I hadn't met the property owner or occupants, and without knowing any other information, my first thought was "I'm buying that property!"

I was out of town and my contractor did an excellent job of dealing with the water situation, and this gave me an excuse to contact the owner of the property. I came to find out that the property was recently vacated, and the former owner was recently deceased, the estate needed to sell BAD. I was happy to swoop in and save the day!

I purchased Right Side while Left Side was about 50% complete, and brought in another contractor to do the work on the Ride Side. We kept it simple - both sides used the exact same flooring and paint color. It was pretty cool to have two rehabs going at once, and super convenient that they were right next door to each other! Both contractors were great to work with - high integrity and quality, and reasonable pricing.

Left Side required mostly cosmetics - new floors, new bathrooms, new kitchen, new appliances, drywall, new electrical upstairs, and paint.

Right Side was on oil heat (50+ year old furnace!!!), so the big ticket item was switching from oil to gas and putting in a new gas furnace. We also put in new floors and paint, redid one bathroom, and some new appliances.

We are using a property manager on both of these properties - the same one we use for other local properties. He filled Right Side in less than 2 weeks, and he filled Left Side in about 3 weeks.

The acquisition of both properties were funded by our own cash (about $31K) and also a few HELOC's (about $57K). The rehabs were funded by private loans at 12% interest. The private loans were repaid in full after completing the cash-out refinance, and then we received nearly all of our money back to pay back the HELOC's and replace most of the cash initially invested.

We found an AWESOME portfolio lender in our area to do the cash-out refinance for both properties. They offer 80% LTV, no seasoning period (meaning we can refinance as soon as the rehab is complete), 5% interest fixed for 10 years, 30 year amortization. Plus this lender loans to LLC's, so we were finally able to form an LLC to put on title for the properties (this is great for another layer of asset protection). These portfolio loans are a game changer!

Both rehabs went well and stayed on budget. We rented BOTH sides out for $100 over our target! The appraisal came in $2K over our target for Left Side, and $1K under target for Right Side (the reason the appraisals were different is because Left Side has 2 full baths, and Right Side has 1.5 baths). So, overall we are pleased with how this turned out! This was a huge confidence builder that we are capable of doing this successfully, and I am now ready to do some more deals like this!

See below for final numbers and before/after pictures!

Notes on metrics:

  • Holding costs include interest payments for HELOC's and private loans, utilities, insurance, taxes and appraisals
  • "Total Cash in the Deal" is the total cash initially invested minus the cash that we got back from the refinance
  • "Cash-On-Cash ROI" is the Yearly Cash Flow divided by Total Cash in the Deal. Think about this another way...how long will it take to recoup my cash invested? For example, we have $3400 invested in the Right Side, and our yearly cash flow is about $3300, so I will recoup my initial cash invested in about a year!
  • Equity Gain - this represents our increase in net worth after these projects were completed. We gained assets worth $191K, gained liabilities worth $153K, and spent a net of $10K. So we have an equity gain (on paper) of about $28K.

Huntingdon Equity Summary.png

Huntingdon Cash Flow Summary.png

Left Side:

 Left Side

Right Side:

 Right Side

 Left Side - Living Room

 Left Side - 1st Floor Bathroom

 Left Side - Kitchen

 Left Side - Kitchen

 Right Side - Furnace (switched from oil to gas)

Thanks for the post and the detail you put into it. You did a good job and it looks like you made pretty good money while you learned. 

I may have missed it but why were your closing costs so high on the purchases. Was it hard money? It seems high if you paid cash. I understand on the refi but just wondering thanks.   Good job.

Originally posted by @Scott Harper :

Thanks for the post and the detail you put into it. You did a good job and it looks like you made pretty good money while you learned. 

I may have missed it but why were your closing costs so high on the purchases. Was it hard money? It seems high if you paid cash. I understand on the refi but just wondering thanks.   Good job.

 Thanks! Here's an outline of closing costs on the Left Side:

  • Adjustments for taxes & utilities ~$600
  • Buyer broker fee (I waived my agent's commission but had to pay my broker's fee) ~$560
  • Title Insurance ~$600
  • PA Transfer Tax (1%) ~$370
  • Misc fees ~$200

Ok thanks. I understand now.

Where did you buy the property? I am looking at similar properties in the Lehigh Valley area. Curious if that is where you did this.  Great job BTW!

@Shane Ward

These properties are 10 minutes down the road from me in Harrisburg, PA.

Just a quiet B class neighborhood on the outskirts of the city.

Awesome job, I am at the beginning stages of a BRRRR Deal now in Coatesville, PA that potentially can turn into two deals as the owner also owns the property on the other end of a 4 row home block and already stated that if closing goes well, he would consider selling the other unit. when i saw this post I was like, wow, this is exactly what we are planning to do. In our case, our number show that we will be able to cash out refi completely and leave ourselves with an infinite ROI. I would be intersted to know where in PA you rehabbed these two properties?

@Marlon Long

Harrisburg, PA!

I really think you could make a strategy out of "buying the house next door".  Or at least buying a neighbor's house.  We had an amazing amount of interest from the neighbors as the rehab was going on, and we actually ended up creating a bit of a neighborhood buzz as people got excited to have two brand new rehabs on their street.

@Kyle M.   Really impressive! It's amazing how things work.. Congratulations and hope to see you succeed with many more to come.. Keep us posted.. 

Would love to get some references from you on the PM and contractors that did such an awesome job! 

Awesome job and great story congrats now it's time to do it again!

@Kyle M. a little adjustment to your cash flow numbers. I think you need to calculate Management as 10% of the (Rent - Vacancy Allowance) i.e. ~ $110, so that further increases your cash flow a little.  PM shouldn't be charging when property is vacant.. It's true that it's all estimates and probably they charge half a month of rent to place tenants which is probably part of this..

@Amit G.

That's true; I guess in a way I'm double dipping a bit there.  

My PM only charges 7% on rent collected plus one month's rent for the lease up fee, so I figured bump it up to 10% to account for lease up fees (which depends on how long your average tenant stays).  You're right, at the end of the day it's just an estimate.  But I do try to estimate conservatively high.

Awesome. Now you can paint the exterior all the same color. :  )  Those places painted 2 colors weird me out.

Great Job! 

What type of permanent financing did you get? Commercial? Residential? 15/20/30? 

Thanks for sharing the details including the numbers! Congratulations on successfully completing this project and wishing you luck on your new deals and projects!

Awesome! @Kyle M. I will have to check that area out. I have been looking in the Lehigh Valley area and am waiting for a home-equity loan to get approved. Looks about like what I am hoping to do

Thanks for sharing your story!  Great job!!

You bought both sides and had two great contractors? And then you found two nice unicorn families and they moved in!? Haha, that's amazing and congrats! 

Wow- taxes must be incredibly low. I'm amazed your PITI is only $580 a month.

I have a question, but not sure this is the right place to ask it. I am partnered with an REI and have been with him for almost a year. He is kind of teaching me the ropes plus I'm doing the marketing of whatever properties he sends me. I have not made a dime in almost a year and am getting frustrated. He has other businesses, so he has an income. I am semi-retired and trying to find an income to help my family. I market what he gives me everyday, but only get "tire kickers" and no serious buyers. Am I allowed to market them on here or is that not a possibility? They are great properties, and I desperately need a sale. Is there any way you can help me? At least point me in the right direction?

Hi Kyle, 

What kind of financing did you get when you refinanced? 

Thank you :) 

Nice job. We're closing on a BRRRR turned flip this month. We'll have about a 15% return over 6 months of holding.

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