FIRST BRRR Complete! Details + Pictures!

301 Replies

@James Gates Yes, I am trying to discern how difficult it is, because there may come a day where I move away from my primary location of real estate acquisitions. That is, people typically see real estate as an anchor, and in some ways it is, but it doesn't have to be.

So what have been your difficulties, what has been easier than expected, etc...?

Congrats @James Gates ! Thank you for outlining your first BRRRR experience, it definitly gives a practical insight into the BRRRR process. Could you explain the "seasoning" process more from your experience? The one aspect of the BRRRR strategy that I don't seem to grasp firmly is how the seasoning period is applied. Could you explain in a little more detail how you first purchased the property and then went to find another lender to refinance? Did you buy completely cash with your liquid capital + HELOC?

@James Gates Thank you for sharing this! My daughter is just graduating college and is planning to buy her first home in the Fort Worth Texas area because that’s where she was offered a job. With very little money down and using a traditional 3% down conventional loan, She will try to do the same strategy by renting out three of the four bedrooms, having her mortgage paid for her, and at the same time saving up $3,000 a month to buy another (fixer) for cash. then fixing it up and renting it out, then refinancing cash out, Etc, etc...

Nice job! I’m hoping to invest out of state as well and have been looking at Huntsville and Columbus OH. Can you share any contact info on your team with me? Anything is appreciated. Thanks!

Originally posted by @James Gates :
Originally posted by @Rehaan Khan:

congratulations! So if you wanted to sell this property. Would it sell for $100K meaning around a $20K profit in cash?

 Hey Rehaan,

The property would probably sell for just over 100K, which would be around 20K in GROSS profit, but with transaction costs and large taxes on flips/investment properties, we have no plans to sell. Our 5-7 year plan is to rent, collect cash flow, and reinvest cash flow. In the future when the principal has been paid down a little, inflation has eaten away the debt, appreciation (strong neighborhood) has lifted the value near 130K, we will "sell" the property with a tax-deferred 1031 exchange so limit our tax liability. 

 That sounds like a solid plan! What is a tax-deferred 1031 exchange?

Great work, @James Gates ! About the refi, what income sources did the lender include in your DTI ratio? I know that some (but not all) include rental income from the property. I left my W2 job recently so wondering how hard it will be to refi with only rental income.

@James Gates - Thanks for sharing. As someone just starting out, it’s great to hear you were able to manage a cross-country deal on your first try (although I’m sure it wasn’t as easy as it sounded). I’m in Chicago, and while not as bad as Cali, a number of things make it a lot more difficult to break into the market while owning your own residence, so I’m looking to go out of state as well. Any tips on finding a location to start scoping out?

Mr. Gates, what an inspirational story / journey.

I happen to live in the Huntsville, AL area at this time and can confirm that the growth is exponential; opportunities abound, specially in the Madison area. I'm not an active investor, but am delving into the real estate realm (baby steps) as my potential source of income post retirement. I've always been a firm believer in real estate, but instead emphasized my military career first and foremost. This approach of course has resulted on missing out on great opportunities. Nonetheless, after 30 years of service, I still see that real estate remains the best option for achieving financial independence, and your story, and that of many others within the BP forums, proves the point. On another note, I just came from a trip in San Antonio, TX and can attest to the exponential real estate growth, whether residential or commercial, opportunities that abound there as well.

Congratulations on your success and wish you the best on all future endeavors.

Originally posted by @James Gates :
Originally posted by @Ronnie Fielder:
Originally posted by @James Gates:
Originally posted by @Justin Dao:

Hey @James Gates,

Thank you for sharing your story. As an OOS investor, on which occasions did you feel the need to fly out to Alabama? To meet the team/on closing the property? Any other reason why you may have flown out there?

Second question, it seems like a silly and simple logistical question, but what do you do with the keys if you close from afar? Do you trust a team member to hold onto them or do you get a combination lock with the keys inside and hang it on the door?

Hey Justin, I did feel the need to fly out to the area the first time to meet the boots on the ground team face to face, but after that, I did not fly out again until after we had purchased and completed the rehab. I did a post inspection with the contractor, but looking forward I do not feel the need to do that again now that the team is in place.  

GREAT logistical question. This is where having a good team can save you so much headache on such a simple thing. My Property Management and contractor have been able to pick up keys from escrow on the properties, and place them in a lock-box at the property so that everyone on the team has access to the property.

James, 

Do all your team members know each other or do they all work independently?  I'm curious who your primary team member is and how you get the various team members to check on others work.

The team members did not know each other at the start of the project, but they were in communication with each other throughout the rehab period. My primary team member was the contractor. Accountability is huge. I would have biweekly phone calls with the contractor, and ask for an end of day report via text/pictures to check on how the project was coming along.

Makes sense James.  I'm always interested in how others do their long distance real estate investing, especially during a renovation.  I have been tied to areas where I have family and/or friends, which I rely upon.  As most can figure out, that comes at a cost of lack of skills, motivation, etc.  As I continue to grow, I'm looking to move on to all professionals on my team(s).

@James Gates Impressive before and after pictures, thank you for sharing!  I'm glad you decided to pull the trigger, you would've never known what you could accomplish.  With almost everything, the 1st is always the most difficult -it'll get easier. 

Thank you SO much for sharing. This is really encouraging! I am curious about how you come upon Huntsville and decided to land there? Sorry if this has already been asked. With so many cities in the US I’m just so curious about what made you land on this one?

Congrats man!!! This is totally inspirational. I am saving up for my first investment and reading everything I can in BP right now. Good to see someone doing it! Can’t wait to dive on in!

Originally posted by @Payton Pearson :

@James Gates Yes, I am trying to discern how difficult it is, because there may come a day where I move away from my primary location of real estate acquisitions. That is, people typically see real estate as an anchor, and in some ways it is, but it doesn't have to be.

So what have been your difficulties, what has been easier than expected, etc...?

Difficulties: Taking the 1st step, finding a HELOC lender. Paperwork for refinance.

Easier than Expected: The closing process. Managing a rehab from a phone. Everything after the 1st step. 

Originally posted by @Kathy Argento :

@James Gates Thank you for sharing this! My daughter is just graduating college and is planning to buy her first home in the Fort Worth Texas area because that’s where she was offered a job. With very little money down and using a traditional 3% down conventional loan, She will try to do the same strategy by renting out three of the four bedrooms, having her mortgage paid for her, and at the same time saving up $3,000 a month to buy another (fixer) for cash. then fixing it up and renting it out, then refinancing cash out, Etc, etc...

Hey Kathy,

 LOVE LOVE LOVE the idea and the hustle from your daughter. Such a smart idea to live like that when you are young and give yourself a financial runaway. I don't think I mentioned this in my post, but my wife and I currently rent two rooms of our home to amazing roommates, which just gives us that much more capital to invest in real estate for the long term. 

Originally posted by @Josh Vines :

Congrats @James Gates! Thank you for outlining your first BRRRR experience, it definitly gives a practical insight into the BRRRR process. Could you explain the "seasoning" process more from your experience? The one aspect of the BRRRR strategy that I don't seem to grasp firmly is how the seasoning period is applied. Could you explain in a little more detail how you first purchased the property and then went to find another lender to refinance? Did you buy completely cash with your liquid capital + HELOC?

Hey Josh,

If you are going to get a conventional loan during the refinance (which generally have the best rates and terms) most lenders will require a 6-12 month "seasoning" of the property. What that means is you need to wait a least 6 months before you can do at a cash-out refinance at more than the purchase price. If I would have tried to get a refinance during month 3 for example, the lender would have been forced to use the purchase price (60K) as the value of the house instead of the appraised amount (105K). 

So basically the property was purchased in cash from a wholesaler, and in 6 months I got a loan on the property to pull my equity out. Because I had purchased under market value and made smart improvements on the property, I was able to get all my initial capital back in my pocket and still have 25% "forced equity" in the value of the home. I bought the property with a partner, he had cash on hand and I had funds from a HELOC.

Originally posted by @Rehaan Khan :
Originally posted by @James Gates:
Originally posted by @Rehaan Khan:

congratulations! So if you wanted to sell this property. Would it sell for $100K meaning around a $20K profit in cash?

 Hey Rehaan,

The property would probably sell for just over 100K, which would be around 20K in GROSS profit, but with transaction costs and large taxes on flips/investment properties, we have no plans to sell. Our 5-7 year plan is to rent, collect cash flow, and reinvest cash flow. In the future when the principal has been paid down a little, inflation has eaten away the debt, appreciation (strong neighborhood) has lifted the value near 130K, we will "sell" the property with a tax-deferred 1031 exchange so limit our tax liability. 

 That sounds like a solid plan! What is a tax-deferred 1031 exchange?

 Hey Rehaan,

I am not a tax attorney, but basically a 1031 exchange refers to a line in the US tax code that allows you to exchange "like kind" assets and defer taxes on the gain. So in real estate, you can "exchange" (sell) a property and you can roll the profits of that property into another property, and defer taxes on the gain. You can, in fact, defer taxes for your entire life by continuing to take advantage of the 1031 exchange. Eventually the plan is to exchange a large number of single family homes for a multifamily apartment complex without paying any taxes (legally).

Originally posted by @Dominic Trujillo :

@James Gates

Hi James, would you mind possibly sending me this lenders info as well? I have a property there I am looking to do the same with as well as a few in the Pensacola area (if they even work out of state as well). Would appreciate it!

 Private message me and absolutely I can!

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