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

[Steve Vaughan]

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!