I'm so excited to FINALLY be able to share the news about our first deal, a BRRRR! I've been (im)patiently awaiting this day, seeing as the project took a BIT longer than we had planned. Here's our story--my husband and I had been talking about flipping homes for a good 10 years now. Yup, 10 years ago I bought my first "how to flip" book, and though it took us a long time to feel like we were in the position to go for it, we finally took the plunge. We spent the first 7 months of 2017 scouring Zillow daily (thank goodness we both enjoy doing this as a pastime). We live South of Atlanta, Georgia, where home prices are pretty darned good, but we were having a fairly tough time finding our ideal property--a foreclosure, no basement, newer than 1990, in at least a B neighborhood, primarily cosmetic fixes. This was our ideal because we felt that this was what the two of us could handle, as we planned to do just about all the work ourselves (we had some experience with tiling, laying hardwood floors, some plumbing and electrical in our own home, and we're good at picking up new skills, which we knew we'd need to do. Finally, we found it: 3 bd/ 2 ba, foreclosure, built in 2005, single story, about 15 minutes from our home. We had saved up a chunk of money, so we were able to make an all cash offer. While this started out as a flip, after listening to the Bigger Pockets Podcast, day-in and day-out while working on the house, we realized that it made more sense to keep this one as a rental, and apply the BRRRR strategy. Here are the numbers:
Purchase Price: $89,000 (paid cash)
Renovations: $16,000 (we had estimated $15,000, so we were pretty pleased with the final number, and we paid this out of pocket as well)
All in: $105,000
ARV: $138,000 (this appraisal was awesome, as our guess was that it would come in at $125K-$130K)
We were able to get 75% cash out when we refinanced, which meant that after closing costs, we were able to put $101,500 right back into our bank account. So, we're only in at around $4000 of our own cash. Of course, the first three months of rent, we didn't have a mortgage payment yet. So, we have made $3600 gross to date. PITI (starting August 1) will be about $660/month, which gives us gross cash flow of $540/mo.
I can't tell you how excited we are that things went relatively smoothly. Granted, it took us WAY longer than we had planned. We thought we'd spend about 3 months renovating (again, we did all the work ourselves, aside from installing a couple windows and a new AC/Heater). It took us just about 7 months, but we were ok with that, since holding costs were low, as we purchased in cash. We treated this as a huge learning process, and we did learn quite a bit. We were juggling work, our son, and free time, and we don't like to stress ourselves out too much. I'm pleased to say that we got along WAY better than we thought we would throughout the process--turns out we both excel at different areas, so there wasn't much room for disagreement :)
I think the most stressful part of the process was actually picking tenants. We got a lot of interested renters, and we really liked a few of them. But, no one was perfectly fitting into our (fairly) strict requirements. I know that we have to learn to be a bit less emotional about the "picking tenant" process, as we let our emotions guide us a bit. But we trusted our guts and found some great tenants in the end. We had considered using a management company, but hated the thought of paying them to do what we could do (at the very least, we wanted to give it a shot). The management company I talked to said we'd be lucky to get $1100/mo rent in that area (they hadn't seen the property). I'm so glad we chose to do it ourselves and get $1200/mo. We probably could've gotten more, after seeing how many people were interested.
Here are some pics:
We can't wait to BRRRR it up again. But first, we're making an AirBnB. Wish us luck...
May I ask where you got the loan from? Congrats by the way...
@Stanley Crawford Yup! We used Bank of Internet. First heard of them through Costco, who used to have a partnership. It was a really easy process.
Congrats on your BRRRR success! Will you try and find a similar property and do it again?
Wow @Kelly Bellini ! That place looks awesome and I'm so jealous of what you can get for $100k in in Georgia, since I'm in California! :)
If you could do it all over again, do you think you would use a contractor to expedite your rehab? You did a LOT for $16k so probably not but just curious if you ran the numbers to see if 5-6 months of rent would have covered those extra costs allowing you to move on faster to the next investment?
Amazing job once again and thanks for sharing!
Congrats on the successful BRRRR!
@Jon Crosby Your question leads into the classic debate of flip vs. buy and hold. If they contract more of the rehab it's going to eat into profits but save a lot of time. I agree they did a lot for $16k! That looks amazing compared to houses I see in my market.
You guys did an awesome job for the money invested. Congratulations!!
@Kevin Brandner Thanks, Kevin! Yes, we definitely want to do it all over again. Gotta get that last R taken care of. We are going to try our hand at an airbnb first though.
@Jon Crosby thank you so much! Yes, prices in GA are insanely good. And the area is really starting to boom because of all the TV/Movies being filmed here. My husband and I both do stunts for TV/Movies, and we actually moved to GA from CA when the industry moved. We were lucky to buy our home in CA in 2009 for 270K, and it's now worth about 500K. (We became accidental landlords, using a management company, on that house, which kinda got the ball rolling for us.) We can't currently purchase any properties in CA--WAAAAAY too expensive, so we'll likely keep shooting for GA. Of course, we'd like to move to UT, so that's a whole other ballgame to learn. Ha! Keepin' life full of adventure.
Excellent question about using a contractor. We did save a TON of money doing the work ourselves, and we learned so much, so that experience is invaluable to us. BUT, in the future, I think we'd get some help and still do some of the work ourselves (the jobs we actually enjoy)--kind of a hybrid. Had we finished 5 months sooner, that would've been about $6000 extra to work with. I actually hadn't thought of that perspective before. I definitely want to go faster next time!!! And now that we know how long things take us, we could work it differently.
@Jaron Walling thank you so much! I'm so happy to get positive feedback from people who are experienced with this. I've learned a ton in these forums and on the podcast! I also learned a lot from my mom and dad who were super frugal and always wanted to do jobs themselves. It's ingrained in me, and I'm pretty pleased at the low amount we spent. :)
@Alicia H. Thank you so much, Alicia!!
Congrats on a well executed BRRRR it looks great!
You've already made that $4k back from the first few months rents.
Now you've got all your cash back, monthly cash flow and an infinite ROI!
@Brian Garrett YES!!! I love it. I can't believe I didn't start doing this sooner. Thanks, Brian!
Great story! I like that you were patient and waited for the right property. That is the phase I am in. How many properties did you visit before settling on this one?
In your original post you mention no holding cost for the first 3 months (no mortgage payments). It appears the cash purchase gave you some good leverage/jump start. Could you expand on that?
@Kelly Bellini did Bank of Internet require any maturing or length of property ownership for the refi? Btw Bank of Internet sounds like a fake bank. Never heard of them so I had to check them out to see they are legit. lol
Numbers are awesome and place looks great. Congrats!
@Ricardo Murph II Thanks, Ricardo! Yes, we were patient (with a little bit of scared thrown in there). I was on Zillow daily, probably quickly analyzed 10-ish properties per day, and then weekly, we probably drove by maybe 3-5 houses (I'm big on peeking around and inside if at all possible). We only pulled in our agent a couple of times. We took our time; we were not in a rush. We just wanted to find something that was not going to overwhelm us or stress us out. I'm glad that we did not just jump into some of the earlier possibilities. I think it could've been a nightmare.
@Chris Purcell thank you so much!
Awesome! Congrats! Well thought out in all respects. Keeping it as a rental afterwards adds to the spice!
Great job! Great experience for you plus you made some good money. Most importantly you gain confidence and skills to go forward into your next investment.
Looks good! Congrats on your 1st BRRRR.
Great work! hope my wife and I can have similar results soon. Keep up the good work
Congratulations. Fantastic deal. BRRRR is the way to go for the first deal. I am looking for my second BRRRR now.
This was very inspirational for me as a newbie and makes me excited for the opportunity of my wife and I working together on this journey. Her job is getting more and more stressful (the environment and corporate issues) and the opportunity to get her out of the situation through real estate is my motivation.
Once again thanks so much for sharing!!!
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