Hi BP and Miami BP,
I've really got to rep Miami because I don't feel that we here in South Florida put our successes out as much as we should. I have successfully completed my first BRRRR and I have learned so much.
For starters I just wanted to thank the entire BP community for the invaluable help that has come my way in the form of the forums, local meetups and especially the podcasts. I can’t imagine how I would have done it without the knowledge and free resources that was made available here.
6 months ago I closed on the my first deal. In order to find it I used a combination of direct mail and bandit signs which I have to say still work plenty well regardless of the new move towards online marketing but that is another story. I want to let everyone know that even with 3 kids (two of which are under 3) IT IS STILL POSSIBLE IF YOU WANT IT BAD ENOUGH. I didn’t have a large marketing budget, or any budget for that matter, so in order to send out the direct mailers I bought a list and put together 2000 yellow letters by buying the paper and envelopes in bulk at Walmart and then spending the next couple of weeks every night from midnight to 2am, after the kids were sleeping, just folding and stamping them to save money. For Bandit signs I ran around on the weekends for a month at 2am until about 5 am putting them up on every corner in my target area. Was it tiring? Of course, especially while having a regular 9-5 to get up and go to every day but I was committed and I still am to my goal of creating a rental portfolio that can help me eventually achieve financial freedom.
So lets get to it.
I purchased a small 625 sqft SFH house in Liberty City. Now I know that those of you who are familiar with the area will say that is a very rough area and you would be right. However, having lived in an area similar to this previously, I felt confident that I could avoid most of the pitfalls of investing in a C class neighborhood as long as I stayed somewhat active in its management and check ins. I realize that this strategy is not for everyone but I think everyone needs to assess their own strategies and capabilities before simply saying something is or is not a viable option.
Here are the before and after pictures exterior pictures:
As you can see the exterior definitely needed a good bit of work. I wasn’t even sure it was a house when I first saw it but it had potential and in this market I feel that you are definitely creating deals more so than just finding them.
The inside was pretty rough too but my contractor was definitely able to give it a great turnaround.
1. JUST GET STARTED!!!
2. JUST GET STARTED!!! Listen no amount of analysis, reading in the forums, or talking will get you into the game. Just taking the first step and doing something is without a doubt the most important aspect of this entire business.
3. Things will go wrong. I am not a contractor nor do I have any plans on becoming one. In the process of doing this BRRRR I had to deal with a broken water supply line at 6 am, a roofing contractor that didn't do a good job and left my roof leaking in various spots, and a call from my new tenants saying that the house was flooding because apparently, as we found out later, the plumber didn't weld the copper supply lines to the shower valve correctly and water was coming out from the wall. But guess what? ITS ALL FIXABLE! It's never the end of the world and I am so glad I got to experience these problems now so as to accustom myself to the fact that this IS THE BUSINESS!
4. JUST GET STARTED!!! This is my very first deal and my first BRRRR. It is cashflowing but I wouldn't necessarily consider it a home run. But I now have the following things that I cannot even put a monetary value as a result of doing it:
- A good and reliable contractor who is ready to help me grow my business and work on future projects.
- An electrician, who I met AS A RESULT of the my contractor.
- A great handyman and gardener, who I met, AS A RESULT of my tenants.
- A fairly thorough working knowledge of how to replace a roof, run plumbing, electrical, hang drywall, lay tile, and the overall costs associated with the replacement and repair of all these things. To me I count those things as probably more important than the actual deal itself
So here are the numbers:
Purchase price: 70K
Renovation costs: 26K (I originally estimated 15K hahaha I wish)
Closing costs: 2K
All in cost of 98K.
Currently rented: 1200 per month.
The bank appraisal with my local bank just came back at 134K and with a LTV of 75% I am eligible to refinance out 101K on the total deal.
I am only refinancing 90K which will leave my all in costs at approx 8K on the deal.
After PITI and reserves for maintenance, capex, vacancy, and management I will cash flow approx 200 a month with a 23% CoC return!
So for all my Miami and SF investors there definitely are deals out here all I have to say is I'm here and I hoping that this inspires you to not only get started but to hopefully seek me out so we can do business together! I'm not a one dimensional investor whether its funding, deal finding, renovations or anything else I'm always eager to learn. So hit me up and lets make sure SF gets its fair share of success stories!
congrats! Off to #2....
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Congrats!!!!! Very inspirational post Jason :)
How did you pay for the project? I am researching how to pay for investment properties and keep running into high buying costs. Was this an all cash purchase or did you finance?
@Jason Brown Congrats! My first deal I lost 18k in Ft Lauderdale and it was the best learning experience I have ever had! You won and learned!
Congrats ! I have been to that area before . Have family in South FL area and was working in the area a few years back . I noticed that the prices in Liberty City and surrounding area have gone up very significantly in the past few years . Like 2-3x .. I’m thinking a lot of it is due to demand from South Americans from Venezuela etc looking to get their money out .
I haven’t bought property in South FL but have bought several in Jacksonville , Florida.
Do you plan to continue focusing on the liberty city area in Miami or looking at opportunities in South FL in general ?
It’s great you were able to take a run down property and provide a nice rehabbed home for a family to live in .
Well played sir!!!
@Jason Brown nice, congrats!
@Jeremy England thanks. I funded about 50% through private money and about 40% through my own personal savings and a loan against my 401K. The rest I just paid out of pocket as I went.
@Nick Britton thanks. Wow 18k loss? I’m glad you were able to see the positive and walk away with lessons learned. I know not all of my deals will be successful so it’s good to see someone with the long term attitude and perspective that i know I’ll need in order to be successful in this business.
@Joseph M. Thanks. Yeah liberty city, allapattah, Brownsville, all these areas are seeing the same upswing in prices that midtown, wynwood and little Havana have experienced. Right now I’m solely focused on investing locally in Miami. I think after a couple properties when I’ve been able to mature a little more as an investor and implement systems that really help me scale I’ll look outside of SF towards the north or even out of state.
Awesome story @Jason Brown ! I love the vision of working late into the nights while your kids are sleeping and you are up working to make all your dreams come true, very inspirational! Can't wait to see your next project!
I've seen it in person you did a great job.
Nice job and good luck.
I would suggest a pedestal sink for a rental. Think about that in two years when you replace the particle wood piece of crap you put in there - lol.
I would also suggest quality-built kitchen cabinets for rentals, for the same reason (not sure what yours are).
As indestructible as possible is usually the best investment for long-hold rentals, IMO.
I chuckled at the 2 am bandit sign comment, are they illegal in your area? Only if you get caught placing them? Just wondering why you needed to do that so late. Too hot during the day?
Last thought, with the $134k, you could sell and create a doomsday egg, instead of fully leveraging yourself. Food for thought and to each their own.
Congratulations! Thank you for sharing your experience and success.
@Elvis Vasquez thanks!
Congrats @Jason Brown keep up the great work, Thanks for sharing.
@Jason Brown , congratulations! That's the kind of hustle that changes lives. That was not just a good deal, but a great first buy.
On to #2.
@Jason Brown Congrats on the first deal!! Just wondering, why would you leave $8k in the property if you could of taken out the full amount. I'm still learning so I apologize if I'm missing something here.
@Merritt Steinbach thanks! YEAH the pedestal sink in the bathroom was something I actively contemplated! The vanity, which i picked up from home depot, was the option i went with only because I had "tried to put myself in my potential tentant's shoes" and thought that with the small size of the bathroom and no medicine cabinet where would my tenants put their bath things and would the rental be less appealing without any real bath storage. Obviously its manufactured wood so i know its going to take a beating but i guess that's just something I've got to work on and mature as i try to evaluate decisions more from a business stand point and not from the perspective of living there myself.
For the kitchen i did actually go for real plywood cabinets because i didn't want to invest in something that I would have to then replace in two years after it got wet and started to swell and break down like the IKEA and other particle board options so that wasn't so bad.
Now for the issue of bandit signs I can't lie they are definitely NOT allowed in my area. My 2 am bandit sign adventures were definitely exhilarating partly due to the fact that I was looking behind my back then entire time to make sure I didn't get caught placing them. The reason i wasn't particularly concerned is because my target area is a popular investor / small business owner area and you can see bandit signs on every street corner from wholesalers, lawn services, tv internet services, junk car removal services and others. I did receive an automated phone call from a local inspector to come and take them down after a period but once i did and alerted them to that they stopped calling me. Its all a calculated risk and understanding what you can and can't get away with in your own farm area.
Lastly as for selling I did actually receive a few offers but unfortunately none of them ever panned out. I had initially started this journey to create a rental portfolio so i guess I was just working from the perspective of creating equity in the renovation and using the refinanced funds as my "doomsday egg/next deal proceeds" if that makes sense.
Thanks for your insights I'll take them any way i can get them.
@Christopher Giannino thanks. No honestly there is no secret to it. I had originally expected the home to appraise for about 120K so i went into my lender looking to pull out 90K which would have been 75% of that. Its only when the appraisal came back at 135K a few days ago that I had the option to pull out all of my investment. I suppose I could still pull out the rest of my money giving me an infinite CoC return but I had just assumed to leave about 40% equity in the property in an effort to be conservative. Maybe not the best idea? What do you think?
@Jason Brown Taking the dream and making that first step, awesome. I hope to be able to do the same soon. Where did you find the private money? Also, if you live in the area what is the reason you elected to get it managed instead of doing that yourself? Sounds like you could increase your cashflow by 50%. It may be harder, but it sounds like youre in the business of learning lessons so that may be another experience to consider!
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