Finally refinanced my first out-of-state BRRR
Here are the results from my first out-of-state BRRR
- purchased property for $62,000
- budgeted $30,000 (expecting it was going to be closer to $35,000)
- ended up putting about $41,000 into the property
- the cash to close and buy the place was $25,000 with Renovo Capital (excellent experience with them, i highly recommend)
My property manager (@Mark Ainley) acted as project manager for a set fee, which I thought was very fair. He doesn't have plans to repeat this service which is unfortunate but understandable.
The appraisal came back at $144,000, which is low because one of the bedrooms didnt get a closet for some reason. The missing bedroom cost me $10,000 in value :( My property manager found a market tenant in under a week, presumably due to the rent being low for 5 bedrooms in the area, but right in line with 4 bedrooms ($1,650/month). There were 5 applicants in the first week.
I received back $24,600 from the refinance, so technically i've got about $400 of my own money still in the property. It took a little less time to renovate the property than it did to refinance. But, in the end I've got a fully renovated 5 bedroom bungalow rented for $1,650/month in an economic opportunity zone for an out of pocket net cost of $400, so it's a victory i guess.
LESSONS:
-confirm and re-confirm the bedroom count. In my area of operation, each bedroom is $10,000 in appraised value which translates into $7,500 back back with the refinance. Thanks to a miscommunication with the first appraiser & my project manager only 4 bedrooms got counted (vs. 5).
-listen to the property manager's recommendations regarding items tenants value. In this case, the PM said that security and safety are much more valuable than, for instance, quartz countertops. So this means heavy-*** security doors, fences, locks/deadbolts, and exterior lighting. Fine by me!
-you might have everything perfectly organized but it's impossible to account for errors made by other people, no matter how careful you are, no matter how much time you spend following up, and no matter if you're correct. In the end, there's a lot that's out of your control, so best to add a large layer of variability to any subjective number, such as ARV, rent, and repairs. It's also best to double whatever timeframe "should" occur so you're not irritated when things don't proceed as they should. Being diligent and well-planned will only go so far. I believe it was Gen. Patton who said "no battle plan survives contact with the enemy."
One last tidbit...although I had a verbal offer to buy it for $175,000, I'm not looking to sell (especially since it's in an economic opportunity zone.) I figure i'll hang onto the place for 10 - 15 years and see what values have done by that time. Still, it's nice to know there was a potential buyer at that price out there so quickly.