FIRST BRRR Complete! Details + Pictures!

304 Replies

@James Gates this is amazing and so encouraging for a new real estate investor who is also from SoCal! Congrats on your successes!

How did you find and manage a team for the rehab remotely?

Originally posted by @Brandon Zeng :
@James Gates congrats! Would you please share how you estimated the rehab cost and mananged the rehabbing OOS?

 For this property, because it had to be sold basically the same day (and it was a holiday weekend...) I wasn't able to estimate the rehab costs as accurately as I would have liked. I knew the house was worth at least 99K, as I had a really good comp to provide that value. I trusted the relationship I had built with the wholesaler already when I had flown out to Huntsville. I basically added a 40% buffer to what I thought the rehab was going to be based on the pictures and the conversations with the wholesaler. My numbers for the Rehab turned out to be 12K, I added a 4K buffer, and then rounded that number up to 20 to be super safe. I added a 1-day inspection period to my offer (my contractor could be there on Monday), and I figured if the property was in much worse shape than advertised I could get out. Luckily for me the property was basically exactly as I thought it was going to be, and we later decided to replace the roof completely instead of repair it, which because I had built in that buffer into the offer did not make the deal a bad one for us. 

As regards to managing the rehab, my strategy was just to learn as I go. I had listened and read as much information as I could from Biggerpockets (@David Greene 's book on out of state investing is pure gold), and knew enough to avoid the major catastrophes (like paying the contractor the full payment up front.). The contractor I found was a recommendation from another BP investor, and it worked out great. I made mistakes and didn't communicate as clearly as I should have the expectations of the project (especially in regards to the timeline), but I learned from the experience and have taken this knowledge into future projects.

Originally posted by @Janine Seikeldjian :

@James Gates

Hi James, we are in Orange County. Thanks for the story it is great to read about other people's knowledge and success. My husband and I are also looking into REI in Huntsville. Guidance and good contacts out there would be so helpful.

Thank you

 Hey Janine! I grew up just around the corner from Anaheim. If you would like to talk Huntsville shoot me a private message!

Originally posted by @Andres Reales :

@James Gates Thanks you for sharing your story.

I'm interested in the BRRR strategy ad well to fund my first deal. However, I have a question. What was your criteria to decide to invest in Huntsville before visiting the city? I'm interested in learning how to analyze good locations to invest in.

 Hey Andrew,

Great question. I spent a good amount of time looking into investor markets and deciding where to buy my first rental. From the start, I knew my one of my biggest weaknesses is I have a tendency to overanalyze a situation, and I knew if I spent a year looking into markets I never would get started.

"Better a diamond with a flaw than a pebble without." — Confucius

Perfect is the ENEMY of great. There is no perfect market. But there are a lot of great ones. Instead of spending months creating pros/cons of the top 20 rental markets, I decided to just pick 1 or 2 markets and LEARN them. Even if the market was not the #1 choice I knew it was going to be good enough to make money. As I was reflecting on the above quote I happened to be listening to a Real Estate podcast at the time that mentioned Huntsville. I began my research (including browsing the Huntsville forums on this site) and decided to focus on this city. I booked a flight, fell in love with the town, and moved on from there.

Originally posted by @Brian Sanchez :

@James Gates how did you find the purchase? HML? business credit? Cash? Traditional lender?

 Hey Brian,

I found the property through a wholsaler.

I funded the purchase with a combination of savings, retirement accounts, HELOC, and partnerships. We used a traditional lender during the refinance process, 30-year fixed.

Originally posted by @Phong Tran :

Congrats man! Love the detailed story and pictures.

Did you find any other properties in the same area? 

What made you specifically choose this property opposed to others?

 I have found some other properties within 20 minutes of this property, and we are in the process of closing a deal that is only a couple blocks away from this property!

I decided to put an offer in on this property for a couple of reasons. The numbers worked perfectly for a BRRRR, and with an appraisal around 100K and a projected rent around $950 (almost 1% rule), I knew it would cash-flow after we stabilized the property. This property was in a nicer area of town than some other properties I had put offers on (and had not had them accepted), so when my offer was accepted I was ecstatic!

Originally posted by @Marzieh Rostami :

@James Gates

Thank you for sharing your story and being an inspiration.

I'm curious to know how you found your contractor and how you managed the rehab from a distance.

Also if you don't mind explaining, I'd like to know how you partnerships work? Are you both on the title and mortgage. How did you set up the partnership? Do you use a lawyer?

Hey Marzieh,

I found my contractor through a reference from another member I had met on Biggerpockets through the Huntsville forums. I interviewed him over the phone, and could tell right away he was a hardworking, professional, and straightforward individual. He did the inspection and sent me detailed photos and a scope of work, which furthered my confidence in him.

With regards to partnerships, some of the properties I am on title (and my silent partner is being paid a % interest agreed to in a promissory note), some we are both on Title (if we both put up 50% of purchase + rehab costs), and one of the properties my partner is on Title (they provided 100% of purchase + rehab, I have 50% equity secured through a Promissory Note). The more options you provide partners the better chance you have at growing your business. One of my partners simply wanted a 10% simple interest balloon payment on their money. Another partner wanted a percentage of the equity. Another partner wanted the asset on their taxes for depreciation purposes. Be FLEXIBLE, protect both parties, and partnerships can be a beautiful thing. We have not yet used a lawyer, but we are using one on the property we are currently under contract as the equity % situation is a bit more complicated. For most of the deals we have used a standard and professional promissory note for the state of California. 

Originally posted by @Robert Howard :

Can you share your loan terms and if its in your personal name or business name? Hope I didnt miss this information and making you repeat yourself.

 Hey Robert,

This property is in my own name. I live in California where the franchise fee of $800 for an LLC does not make economic sense. Instead, I purchased in my own name (and got the best interest rate because of this), have great property insurance, and took extra protection by purchasing a personal umbrella liability insurance policy.

Originally posted by @Thuy Pham-Satrappe :

@James Gates this is amazing and so encouraging for a new real estate investor who is also from SoCal! Congrats on your successes!

How did you find and manage a team for the rehab remotely?

 Hey Thuy,

I found a property manager through a recommendation on Biggerpockets. I flew out to meet them when I visited the town and was impressed with their operation. They were a big help in providing information for a first time investor!

Originally posted by @Justin Franklin :

@James Gates wow what a great story! So you cash out refi'd and now you can pay off the HELOC, got your $18k back and you can do it again! How did you find the repairs? Did that come out of the HELOC???

Thanks for sharing!

Absolutely!

The repairs did come out of the HELOC as well. The HELOC is basically a credit card checkbook , so I was able to write my contractor checks from my HELOC account and they are as good as cash.

@James Gates ohhh gotcha. I thought the HELOC was $50k and then purchase price was 60k + 18 in repairs. Is there where your partner came in ?

Also, thank you for the Huntsville plug! I’ve been looking in Birmingham but now I’ll expand my search !

Originally posted by @Otis Sanders :

@James Gates do you mind telling me what lender you used? I have a property in Alabama I’m looking to place a mortgage on. Ive been struggling due to the small loan amount.

Thanks

Private Messaged! 

Originally posted by @Anvith Amin :

@James Gates

How did you setup your partnership on these rentals ? Do you guys split the cashflow 50-50 ?

 Yep, everything is split 50/50. Any profit from the refinance, cash-flow, and equity when we exchange the property.

Congratulations! I'm almost done with a 6-month BRRRR as well. Were lenders willing to speak with you at the 4ish-month point in order to close at 6-months instead of beginning the financing process once 6 months had passed? Our roof is going on now and once finished I'll be ready to work on financing. One complication for us has been a tenant that we chose to keep through the process. It isn't easy to do interior work with somebody living in the home, but he's a really solid tenant so we're working around it.

Originally posted by @Mary White :

Congratulations! I'm almost done with a 6-month BRRRR as well. Were lenders willing to speak with you at the 4ish-month point in order to close at 6-months instead of beginning the financing process once 6 months had passed? Our roof is going on now and once finished I'll be ready to work on financing. One complication for us has been a tenant that we chose to keep through the process. It isn't easy to do interior work with somebody living in the home, but he's a really solid tenant so we're working around it.

 I started working with a lender at the 5 month mark, and we were able to close at 6 months + 1 day. The lender basically said we could start the process as soon as the place was "appraisal ready." 

Originally posted by @Chris Connolly :

@James Gates how did you get a HELOC with only 20% down?

After some searching I found a bank that would lend on a HELOC up to 90% LTV. We had put down 20% on our primary residence, so we were able take out a little more than 50% of our equity (when we did the appraisal for the refinance, our home appraised for 20K more than we bought it for and we were able to take out a loan on the higher amount).

@James Gates Congrat on your success!! and thank you for sharing. Do you happen to know if the lender you are using is also serving outside AL? My business partner and I have two rental properties in FL that we paid all cash (free and clear). Now, I wanted to do cash out refinance on both of them. I will private message you.

Question about your partnership where both name on the title ("some we are both on Title (if we both put up 50% of purchase + rehab costs)"). Did your partner contribute something else beside 50% capital which you also put up the same amount? It looks like you were the one who did all the work from finding the deals to managing the rehab, etc... And, do you self-managed all your properties?

Thanks.

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