My BRR (no Refi or Repeat) pics, #s and takeaways!

44 Replies

So I've been slogging through a 3-month rehab and rent house for the past 6 weeks.  Condensing a large project in half as a DIY beaver that likes to build his OWN dam is not recommended.  I took on a frantic timeline because my pending renters' house was being sold by their landlord.  My big why is to provide nice, affordable housing to good people while improving property and communities. My why kept me going when I wanted to quit!  Most of us that rehab have been there...

How I found it.  In May my friend and sometimes contractor that has an office next to my mixed-use commercial bldg ran into me one day and asked if I'd give him a price opinion on a house he and his 2 siblings inherited from their brother. He asked me as an investor because it had too many repairs for a bank to lend on it. I told him I'd be at $75k (what I bought the house across the street for), but encouraged him to get a CMA from a realtor and was off to my son's bb game. We spoke over the coming weeks and came to an agreement after all. I was not really looking for a new property.

How I funded it.  Cash.  I can move fast, value-add and save $4k in borrowing costs.  I've been knocking out debt for a while so cash-flow is high without getting more tenants and more toilets.  I also sold 3 of my least favorite rental houses over the last 12 months, by owner, at retail, within weeks.

The numbers. We settled on $90k with him paying closing costs (about $3k split between 3 of them), him building a deck and leaving a really nice shed/shop on the property.  My rehab budget was $7k so I recorded a $97k deed of trust / mortgage coinciding with the closing date from my generic sounding s-corp I use as my mgt co.  If I decide to refi down the road, I should be able to avoid seasoning and other potential problems of cash-out.  It should just be a rate/term refi to get every dollar back.  

I estimate the value of the house now to be $155,000 and it is rented for $850/mo.  It's the equity I wanted and it almost meets the 1% rule,  which is almost impossible here in the beautiful and growing Wenatchee area.

The rehab.  I actually only spent $3.5k. (Also see   "How I turned $40 into $10k in 2 hours"

https://www.biggerpockets.com/blogs/11016/74993-ho... )   

Everything in this house was 'almost'.  New windows, but nothing trimmed out.  A mostly enclosed with plywood mudroom, but with huge gaps in the ceiling and no insulation. Broken and chipped asbestos tile siding, some facia, but not all.  No soffets, no gutters, missing interior trim on all windows and most of baseboards, a wall completely in the way when you entered, washer/dryer relocate, no drain venting so rotten eggs overpowered you every time you ran water, etc.  Seeing this everyday I'm sure was a factor in my friends' brothers' delilberate demise.

The renters helped me clean and paint beginning a few days before finishing yesterday.  They also brought us food and lots of encouragement.  This is rare, believe me.  It further affirms my why.  The struggles and frustration of this project melt away when I think my grateful renters moving in yesterday, all smiles and glee!

Key Take Aways.  1) Know your purpose and exit strategy.  Why are you doing it?  I want to provide quality housing at an affordable price and improve communities.   This will be a 3-year hold and I will lease option it beginning month 13.  

2) I want to employ my boys to teach them valuable skills and that money comes from WORK.  They were too young to remember how much I used to work on my properties.  These days I take a lot of naps and live on passive income only.  Don't want to give them the wrong idea.

3)  Jump in and try. Do your own easy and safe things like clean-up, painting and yardwork at least.  Working in the yard gave me 2 new leads from passer-byes. 

4)  Stay local.  I would not recommend an out of area rehab to anybody.  Too difficult to manage and oversee.   

Now back to my regularly scheduled nap!

She was a beauty!

Unfinished everywhere.  We insulated and rocked this mudroom.  On left in next shot.

Got this monster fridge for $250 from a lady 3 doors down.  Had to un-bury it in her garage.

Removed wall, relocated dryer, added wall heater and $300 of hardwood I installed.

Getting there!  Typical rehab scene- tools and material everywhere. Best maintenance guy ever helping out!

All done.  Thanks for reading!

Originally posted by @Brian Ellis :

NICE @Steve Vaughan it came out awsome

 Hey thanks, Brian.  Glad it was just a little 850ft 2/1.  A larger house would've crushed me on that timeline!

850 sqft still is a decent amount of work. My home I renovated 1250 sqft, and im still tired from it. Took me about a year lol.

The duplex im working on now is two 1br apartments @ 640 sqft. And luckily, only one needs to be renovated. Man, what a piece of cake this is in comparison!

Originally posted by @Brian Ellis :

850 sqft still is a decent amount of work. My home I renovated 1250 sqft, and im still tired from it. Took me about a year lol.

The duplex im working on now is two 1br apartments @ 640 sqft. And luckily, only one needs to be renovated. Man, what a piece of cake this is in comparison!

 Good thing you began with a large one in your house. Others will seem easier!

The bulk of my time and energy drain on this one was finding hardwood to best match 60yr old soft fir 'hardwood' flooring, figuring out how to blend old asbestos tile siding patches with something modern and the main drain and in-wall dryer venting. 

You are on a great path, Brian.  This is my 22nd or so, although not all were this deep.  I still have 19 of them just trucking along, paying off and providing me a little golden egg every month.

Originally posted by @Steve Vaughan :
Originally posted by @Brian Ellis:

850 sqft still is a decent amount of work. My home I renovated 1250 sqft, and im still tired from it. Took me about a year lol.

The duplex im working on now is two 1br apartments @ 640 sqft. And luckily, only one needs to be renovated. Man, what a piece of cake this is in comparison!

 Good thing you began with a large one in your house. Others will seem easier!

The bulk of my time and energy drain on this one was finding hardwood to best match 60yr old soft fir 'hardwood' flooring, figuring out how to blend old asbestos tile siding patches with something modern and the main drain and in-wall dryer venting. 

You are on a great path, Brian.  This is my 22nd or so, although not all were this deep.  I still have 19 of them just trucking along, paying off and providing me a little golden egg every month.

I was going to ask how many you have done, that's inspiring. Was this a goal of yours from the start? There was a time I couldn't fathom the idea of owning a home, and now I have two. 

Originally posted by @Victor S. :

nice! how did you score that much wood for only $300?

 Thanks, Victor.

I only needed a strip where the wall was that was about 40"x7', then the laundry area in front of the bathroom at about 5×6. 55 or so sqft. 3 boxes of Bruce Hardwood at Lowe's (new line so special order 3 days out)  for $94 each.

wow our east coast and mid west BP buddies must be  aghast 200.00 a sq ft for an old 2 and 1.... 

LOL.. give me net equity every day all day.. nice work.. keeps one in shape.. I just got done cleaning the bugs out of my sauna so my wife does not freak out.. !! that's the extent of my handyman capacities..

Originally posted by @Jay Hinrichs :

wow our east coast and mid west BP buddies must be  aghast 200.00 a sq ft for an old 2 and 1.... 

LOL.. give me net equity every day all day.. nice work.. keeps one in shape.. I just got done cleaning the bugs out of my sauna so my wife does not freak out.. !! that's the extent of my handyman capacities..

 Hey thanks, Jay.   I was surprised by the per sqft valuation, too, until I saw a 537 sqft (+220 in the basement)  1/1 list down the street for $167.  Listings are not sales, of course, so I estimated on the low side.  I'll dig deeper before I lease option it next year.

You know, I wish at times I never bothered and went through the pain of learning all these trades.  I'd probably be working on my business by now instead of in it. LOL

Originally posted by @Brian Ellis :

I was going to ask how many you have done, that's inspiring. Was this a goal of yours from the start? There was a time I couldn't fathom the idea of owning a home, and now I have two. 

 When you do so many it's more tiring than inspiring.  LOL  But glad it is for you and thanks for saying so.

As for renovating over 20 rentals being a goal? No but yes.  If I could find pretty places in perfect condition at a price that penciled, I and probably anyone would rather skip the fun of a rehab, right?  A lot of mime are like this one. Can't be financed, inherited or sudden selller and they call me. Usually when I'm not even hunting.

Anyway, it gets easier. You acquire the tools and the experience and contacts of good help (hopefully) and work like no one will to later enjoy what no one can!

Wow 850 sft for a house/ O___o! That house looks awesome hopefully you can keep it up by finding some with less work hopefully. 

Originally posted by @Melissa Gittens :

Wow 850 sft for a house/ O___o! That house looks awesome hopefully you can keep it up by finding some with less work hopefully. 

Definitely wish it was less work, but if it was bankable. they would have just listed it and sold it conventionally. No soup for me!

Funny, the more of these we do, the more tools, experience, processes and contacts we nail down, making it better and easier to do it again.  Right about the time we are ready to hang up the cleats/toolbelt, we have it all just about figured out.  Wish it was the other way around, have it figured out when we're young and have the energy!

Originally posted by @Chad Meyer :

@Steve Vaughan Wow, awesome work and thanks for sharing! I'm looking to BRRRR in that price range as well to get us started in our investment adventure. This gives me hope!

 Thanks, Chad.  Yes, there is hope!  In every market is a homeowner with a problem that needs solving.   Mine was in a small town, so lot of folks say 'talk to the apt guy' if they don't already know me.

How do plan on funding your BRRRR, Chad? If I didn't have the money for this one, I have a couple private lenders I would have run it by. 1 likes long-term (10yr fixed) holds, the other likes 6 month turns. Gues which is cheaper. LOL

@Steve Vaughan

Two thumbs up! Place looks great and it sure is a good feeling providing a nice rental property. My last rehab took one day to rent because nothing else on the market at the time even had fresh paint. When I finished that house the house around the corner had been for rent for 68 days @$1200 a month. Same sqft as mine. Rented mine in one day for $1895 a month. A nice rental goes a long way.

Originally posted by @Clifford Paul :

@Steve Vaughan

Two thumbs up! Place looks great and it sure is a good feeling providing a nice rental property. My last rehab took one day to rent because nothing else on the market at the time even had fresh paint. When I finished that house the house around the corner had been for rent for 68 days @$1200 a month. Same sqft as mine. Rented mine in one day for $1895 a month. A nice rental goes a long way.

 Same size as yours and couldn't rent for $695 a month less?  That's awesome, Cliff!  Did you go above and beyond with tile, granite, stainless?  How long did it take to finish?  You should post about it!

Mine was rented before I bought it basically.  The seller knows a ton of people as the 1 decent contractor in town. He told the family I rented it to that I was going to turn it into a rental.  When they called me out of the blue one day, I had to say 'Hold up, Sparky.  Once I close on it, I will get you an application.'  Rentals are tight, even in rural areas of 1200 people.

@Steve Vaughan

It took 4 months to complete due to scheduling problems with subs. The only over the top upgrade was good quality wood looking tile throughout home. I hate carpet and have gotten tired of replacing it after 35 years of investing. I rather spend a little more up front on tile or wood floors than spend more over time on carpet.

I'm still trying to figure out how to post pictures on BP. It took me a couple of months just to get my profile picture to upload. LOL I'm about to start on a 546 sqft Flop I bought for $25k that I will be a Airbnb and a place for us to stay when we come to the city. I would love to document it.

I keep track of that other house and it finally rented after 112 days. Only after they went in an painted it and did some landscaping. The funny thing is our market is also tight on rentals so that house must of really stunk. 

Nice article Steve. My kind of approach. I haven't been in the game long, but there is something wonderful and inspiring about putting your hands on something to create and improve. I've seen "the look" from new homeowners and renters before. Good feeling. Keep it up. Just dont forget the map. I like to take mine on my boat.

Be safe.

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