My 1st BRRRR a base hit!

My 1st BRRRR a base hit!

Sean RooksPro Member
Rental Property Investor · High Point, NC · Member since 2017 · 272 posts · 304 votes

Just finished my first deal, a BRRRR triplex in Norfolk, VA

BUY: 2400 sqft triplex:

1) 1bd/1ba 550sqft @ $550/mo

2) 1bd/1ba 625 sqft @ $600/mo

3) 2bd/1ba 1250sqft @ $800/mo

Purchase Price: 136k

Rehab Budget: 60k

Expected ARV: 265k

Expected final rents: $600, $700, $950

Analysis:

REHAB:

RENT: We did a little non-standard rental here. Since it was already rented out, we had to get creative with the rehab and renting.  and We started with the exterior, landscaping, and new HVAC and windows. 

One tenant was evicted for non-payment, so we renovated that next. Then asked if anyone was interested in moving into the newly rehabbed unit while we renovated theirs. This worked for the other 2 units. All are re-rented now (2 to origional tenants) at the prices reflected below

REFINANCE:

REPEAT: As always, there are some errors I want to improve upon for the next. I hope this well help some others. Systems will go into place to prevent repeating errors, and repeating what was successful, 

1) Purchase price too high. I bought this off the MLS, I think I could have negotiated it lower, and in the future will look to more off market deals. I don't regret buying it, as a learned a ton and it still cash flows nicely.

2) Under estimated rehab budget. It was originally built in 1920s. So HVAC costly much more than I budgeted. It was worth it to attract a higher quality tenant, remove the window AC units, and get the tenants paying their own utilities. Next time I'll know whats involved in an older home and have a better estimate on rehab costs for HVAC. (side note: ductless mini-splits are highly efficient and cheaper to install than a full vented system in an older home. Just make sure its a moderate climate as they don't provide tons of heat in cold winters.)

3) Not understanding all the ways an appraiser can appraise small multifamily (read: overestimating ARV). I used only the $/sqft method to find an ARV for this property. ARV is arguable most important number in the analysis. Since I was off by 20k, I left 20k more in the deal than I wanted to. The appraiser used a combination of $/sqft, $/room, and $/apartment. They then averaged the three. My $/sqft was right on, but the other two were lower, bringing the average down.

Summary: With the glass is half full attitude I count this as a base hit. It cashflows at $121/door (goal: $200/door), at an 8.5% CoCROI (goal: Infinate, min goal: 10%), I learned a ton, and got my feet into the small multifamily door. Ready to repeat!

107Reply
407 views

Most Popular Reply

Norfolk, VA · Member since 2019 · 3 posts · 14 votes
7y

@Sean Rooks This is a great breakdown of your first multifamily BRRRR. I hope to get to do this one day with a single family unit in Hampton Roads.

I would like to use your breakdown as a learning opportunity. How long did it take to prepare to my such an investment? Did you already have the financing (down payment, pre-approval in place well beforehand? Did you already have a contractor in place prepared to do repairs? I'm really curious because it seems like it all came together very well for you and you come off as an extremely prepared individual.

See this reply in the discussion

114 Replies

Jump to latestLatest
  • Rental Property Investor · Norwalk, CT · Member since 2017 · 171 posts · 138 votes
    7y

    Congrats @Sean Rooks...learning is the biggest part of this business, even in the errors you still come out on top. Good job.

  • Norfolk, VA · Member since 2019 · 3 posts · 14 votes
    7y

    @Sean Rooks This is a great breakdown of your first multifamily BRRRR. I hope to get to do this one day with a single family unit in Hampton Roads.

    I would like to use your breakdown as a learning opportunity. How long did it take to prepare to my such an investment? Did you already have the financing (down payment, pre-approval in place well beforehand? Did you already have a contractor in place prepared to do repairs? I'm really curious because it seems like it all came together very well for you and you come off as an extremely prepared individual.

  • Rental Property Investor · Los Angeles · Member since 2019 · 284 posts · 184 votes
    7y

     Great job!    You mentioned “The appraiser used a combination of $/sqft, $/room, and $/apartment”.    Can you clarify what you mean by $/room and $/apartment”.... and whats the difference?

  • Real Estate Agent · West Chester, PA · Member since 2017 · 83 posts · 42 votes
    7y

    @Sean Rooks great breakdown. Seems like the lessons you learned will pay you back multiple times. Certain appraisers will use different valuation models, and it helps to learn what may be considered the "norm" for your area so that the next time you're that much more prepared.

    Are you looking to stay primarily in the small multifamily space for your BRRRR deals?

  • Investor · Memphis, TN · Member since 2013 · 741 posts · 845 votes
    7y

    @Sean Rooks congrats your in the game now my friend!!!! How fast can you get to deal number 2 don’t lose momentum! 

  • Member since 2019 · 13 posts · 19 votes
    7y

    @Sean Rooks What software did you use to do your projections? I like the layout of what you showed in the included pictures

  • San Diego, CA · Member since 2018 · 210 posts · 67 votes
    7y

    Hello Sean,

    Good job on the first deal. 

    Sincerely,

  • Sean RooksPro Member
    OP
    Rental Property Investor · High Point, NC · Member since 2017 · 272 posts · 304 votes
    7y

    Thank you all for the kind words!

    @Edward T Artis

    How long did it take to prepare to my such an investment? I started listening to BP Podcast about 1 year prior to purchase and started combing the MLS 6 mo prior, this was about the 100th property I analyzed, 7th I offered on, and only accepted. 

    Did you already have the financing (down payment, pre-approval in place well beforehand? Yes I had a pre-approval ready to go, I also had the down payment saved up. As for repairs I used 0% interest Credit cards for half(be careful here, as I had plenty of income to offset if this went wrong at the refi) as well as a a private money loan from a partner. 

    Did you already have a contractor in place prepared to do repairs? I did have 3 recommendations on contractors and got a bid from 3 then picked the best. Tons of lessons here too, in the future I will have signed contracts, and trim down my SOW to what will actually be a return on my investment. 

    @Alvin Uy

    Yes, I can clarify. The appraiser used a combination of 'methods.' He picked his 3 comps of other small-multis in the area, then, adjusted them to make them similar to mine then:

    1) He found the price/sqft of each comp

    2) He found the price/room of each comp

    3) He found the price/apartment of each comp

    He then used those prices to find a value for my property by each method. Lastly he averaged those 3 numbers to arrived at my assessed value.  

    @Noah Scott

    @Noah Scott

    I am looking to expand to 6-12 unit properties for the next BRRRR!

    @Cole Miller

    @Cole Miller

    For the original analysis I used my own excel sheet I created mirroring the BP BRRRR calculator. For the refi, I became a PRO member and used the BP calculator.

  • Tulsa, OK · Member since 2018 · 2 posts · 5 votes
    7y

    Congrats @Sean Rooks ! I really want to take advantage of the BRRRR strategy soon

    What kind of loan did you use to fund the initial purchase? 

    Terms/Rate? 

  • Rental Property Investor · Doylestown, PA · Member since 2008 · 1k+ posts · 1k+ votes
    7y

    @Sean Rooks - it's all about momentum.  Keep it up.  If you need any advice on growing, message me.

  • Rental Property Investor · Honolulu, HI · Member since 2018 · 335 posts · 251 votes
    7y

    @Sean Rooks nice “base hit” lol. Love the detailed breakdown, lessons learned and overall attitude and mindset through the whole process.

  • Contractor · Simsbury, CT · Member since 2014 · 54 posts · 13 votes
    7y

    @Sean Rooks

    Great job! Next one will be extra bases!

  • Rental Property Investor · Rochester, NY · Member since 2013 · 162 posts · 127 votes
    7y

    @Sean Rooks congratulations on your first BRRRR investment. I like the way you break down the details in each BRRRR it give us the complete picture of what it take and what the process look like. Do you feel that it take about a year to prepare for the first BRRRR investment? Have you read the BRRRR recently published book? One of the most challenge in BRRRR strategy I'm learning is refinance aspect. Finding the right lender who can refinance with LLC. Do you refinance in your name or LLC?

    Congratulations again

    Alex

  • Sean RooksPro Member
    OP
    Rental Property Investor · High Point, NC · Member since 2017 · 272 posts · 304 votes
    7y

    @Lucas Whaley

    I used a conventional 30 year loan, 25% down, at 5.125%. The property was in good enough shape at the purchase to qualify, so it made the most sense financially to get a low interest loan, especially since the rehab was going to take almost 9 months doing 1 unit at a time with moving tenants in between. 

    @Alex Jones

    I do think a year was a good amount of time to study and learn, establish some contacts and get organized. If I was at it full time, maybe sooner! I have not yet read David Greenes book, but its definitely on my list. Mostly I used the Podcasts and forums to gain BRRRR knowledge. I explored a few local banks, and was ready to refi in my LLCs name with a commercial loan. However, I found a different lender at a local Meetup (thanks @Melanie McDaniel) that offered a better rate, and a quick refi. Though it is in my name, I'll transfer to an LLC soon and take the 'due upon sale' risk.

  • Chicago, IL · Member since 2018 · 3 posts · 3 votes
    7y

    @Sean Rooks thanks for the detailed breakdown! Super helpful as I try to learn more about the BRRR method.

    Two questions for you:

    - You mentioned that next time, you plan on looking "off market" rather than using the MLS. What would this look like exactly?

    - How did you estimate rehab costs? Did you have a contractor do a walkthrough? I know that you mentioned that you underestimated costs due to age of the building, but any learnings from a process perspective (in terms of how you estimated cost) that you took away?

    Appreciate the help.

  • Rental Property Investor · Norfolk, VA · Member since 2013 · 44 posts · 67 votes
    7y

    @Sean Rooks - Congrats on your first investment! I purchased my first multi-family property in Norfolk back in 2013 off of the MLS and share a similar experience with having overpaid to acquire the property. Nevertheless, the knowledge I gained taking that approach was invaluable as it completely reshaped my strategy moving forward and I'm sure it will have the same effect on you. Considering that we are operating in the same market, here are a few pointers that I would like to offer:

    1. Whether it be the MLS, pocket listing, or wholesale deal, CASH IS KING! If you make your money when you purchase a property, positioning yourself to get the lowest price (by making a cash offer) is ideal.

    2. The local credit unions are a GREAT source for your cash-out refi needs. Contact the Business Services department, tell them what you want to do, and they'll lay out their terms. You can get up to 80% LTV in your LLCs name, and 90% in your own, depending on the institution.

    3. David Greens book on BRRRR is a great read. It will help you refine your approach.

  • Flipper/Rehabber · Jackson Heights, NY · Member since 2019 · 28 posts · 16 votes
    7y

    Bro great Journaling,

    This is really helpful for us to see a play by play. Im almost there hope in the next 3 months ill be able to compare some notes! I think more than a base hit due to the experience and Knowledge gained!

    Best of Luck and keep it up bro.

    Lewis.

  • Member since 2019 · 14 posts · 4 votes
    7y

    Great job bud. @Sean Rooks aka Sean Rocks

  • Gina AnsonPro Member
    Rental Property Investor · Boise, ID · Member since 2017 · 22 posts · 8 votes
    7y

    Way to Go Sean!  That is such a CUTE tri-plex!  You did a great job!  You provided a great review and I am sure you learned a ton for your next one!  Congrats!

  • Investor · Union City, NJ · Member since 2019 · 32 posts · 7 votes
    7y

    Good job!  Next domino needs to be 1.5x bigger than last to keep geometric progress. Don’t lose momentum!  

    Great notes on the re-fi and keeping tenants in there helped keep holding costs down even if it delayed rehab time.  Awesome! 

  • New Zealand · Member since 2018 · 8 posts · 5 votes
    7y

    Congrats @Sean Rooks, good job and thoroughly managed by the look of your paperwork. Moving the tenants around within the property was a creative idea. Keep it up!

  • Rental Property Investor · Member since 2019 · 18 posts · 20 votes
    7y

    Thank you for the great detailed break down! 

  • Member since 2019 · 1 post · 1 vote
    7y

    Great Job! I am currently in Richmond looking for a rental property. Nothing really seems to be in my price range of max 20k. But this very inspiring.

  • Sunnyvale, CA · Member since 2017 · 21 posts · 19 votes
    7y

    @Sean Rooks

    You likely are not taking on any "due on sale" risk. I am not exactly sure on the specifics, but I do know the rules rules have been recently clarified. 

    Transferring to an LLC you 100% own is kosher and can not trigger "due on sale" clause.

  • Real Estate Agent · Chesterfield, MI · Member since 2017 · 53 posts · 7 votes
    7y

    @Sean Rooks great breakdown . This is the best BRRR method. Congrats on you completed BRRR. I plan to do my first one by next year.

    Cheers to many more

Join the conversationCreate a free account to reply, vote on answers and follow this thread.