Monster 3 unit BRRRR complete!

122 Replies

I completed 4 single family BRRRR's last year, and this year I was ready to take the next step to complete a multifamily BRRRR. This deal was listed on the MLS but was not on my radar until @Travis Wylie texted me the listing.  It IMMEDIATELY got my attention and I was under contract about 24 hours later.  It was listed for $100k and I got it for $85k cash.

The property was a probate property.  It was originally a 3 unit (I converted it back to a 3 unit) and had been in the family since 1946 (and they hadn't done much updating at all!).  It's huge - over 3,000 sq. ft. and each unit is 2 bed, 1 bath, plus there's 2 garage bays.  It's in a fantastic location in arguably one of the hottest rental markets in the Harrisburg, PA area.

I was able to close in cash with some HELOC's and cash leftover from my 2018 BRRRR's. Then I was able to raise the rehab funds using a secured time note from a commercial lender, private loans from friends/family, and a business LOC.

I re-did my analysis on this property literally about 20 times while renovations were ongoing. I ended up putting in A LOT more in renovations than anticipated, but the ARV ended up coming in much higher which compensated for it. I also ended up getting much higher rent than anticipated. This place is going to cash flow like crazy!

Renovations included the following:

•Previously one electrical meter and panel box, installed 4 new meters and 4 new panel boxes, complete rewire of entire building
•New outlets, switches, and light fixtures
•Repaired foundation
•Split gas into 3 meters
•Brand new ductwork, furnaces, and Central AC for Units A & B
•New gutters & downspouts
•Roof, flashing repaired
•Trees around house removed
•Entire exterior painted
•30 windows replaced

•2 new water heaters
•Replaced about 75% of plumbing
•Cleaned out garages, installed divider, and installed new garage doors
•All 3 units:
• New floor & paint, drywall repair
• New kitchen cabinets, counters, appliances
• New toilet, shower/tub, vanity

Purchase price: $85,000

Renovations: $175,000

All-in, including closing & holding costs: $270k

Appraised at $306,000

80% LTV cash out refi (cash back after fees): $236k

So I'm left with about $34k in the deal.  I was able to rent out the units for 1100 (including 1 garage bay), 1000, and 900.  Plus one garage still needs to be rented.  So, gross rents will be over $3,000/month.

After paying PITI, maintenance, management, utilities, and Cap Ex/vacancy allowance I'm cash flowing about $500/month.

This deal was about as big as I could handle - I ALMOST bit off more than I could chew - but I got through it, made a ton of mistakes and learned a ton! I scared a few contractors away, and had to fire another one, but the ones who made it through ended up proving they can handle a big, (relatively) complex project.  We had electrical, HVAC, painters, garage door specialists, and general laborers/handymen on the project, and some days they were all there at once.

The biggest two things I learned were how to better estimate rehabs (this will be an ongoing education) and also how to better estimate ARV on a 2-4 unit property.

Pics below!

Wow, those pictures look awesome! Congratulations! Definitely an inspiring story. I could only imagine the stress you were going through as the renovation costs were adding up.. $175K is no small rehab. Great Job!

Originally posted by @Brandon Roof :

Congrats @Kyle M., looks great!  Do you know what product was used to refinish the shower tile and bathtub?

 I'll be honest, I'm not sure! It looked good, and was cost effective, which was good enough for me! All I know is it was some kind of special epoxy paint.  It was sprayed on and the guys had to wear masks, gloves, etc.

Kyle, everything looks great! and love the number that you provided for us. that $500 a month in cash flow is a great reward for the work that you put in! Im wondering what were some of the mistakes that you made that could've been avoided  as well as those that were made that you which you could've done differently.

I have an odd question; 

If you hadn't been in a position to do the rehab immediately, was it safe/habitable enough to rent "as is" with only minor work/cleaning, and if so, what would the cash-flow have been?


I have an odd question; 

If you hadn't been in a position to do the rehab immediately, was it safe/habitable enough to rent "as is" with only minor work/cleaning, and if so, what would the cash-flow have been?

@Keeshaun King

Thanks everyone!

Mistakes made:

Majorly underestimating ARV - it's so hard to get good comps for multifamily 2-4 units, so I think I was overly conservative in order to compensate for lack of certainty. Going forward, I've found that appraisals will typically come in at or around the 1% rule on 2-4 unit properties. For this 3 unit, gross rents are $3000/month and the appraisal came in at $306,000...very close to that 1% rule.

Majorly underestimating rehab - need a checklist to inspect all major mechanical items such as roof, HVAC, electrical and plumbing. These items alone totaled over $50k and my allowance for these expenses were initially much lower. There were certain items that I overlooked entirely such as gutters.

Majorly underestimating rents - not sure what I could’ve done differently here. The rental market has just really picked up here! I will say that tenants will pay a premium for a nicely updated unit with central air.

Going with the cheapest contractor - took a risk on a contractor who was by far the cheapest but ended up being a complete deadbeat *facepalm*

@Deanna Opgenort

Only the top unit. There was a tenant in there paying $300/month

I probably could have gotten $600-$700 for that unit as-is. But that’s just not how I want to run my business. I want all my units to be updated and commanding market rents or higher. Bottom line I want them to be a nice place to rent.

This is awesome! I live in Mechanicsburg, PA and have looked in Harrisburg but haven't pulled the trigger. I definitely need to drive the area and check things out. Thanks for sharing your story and pictures!!

Originally posted by @Kyle M. :

@Deanna Opgenort

Only the top unit. There was a tenant in there paying $300/month

I probably could have gotten $600-$700 for that unit as-is. But that’s just not how I want to run my business. I want all my units to be updated and commanding market rents or higher. Bottom line I want them to be a nice place to rent.

 Oh, I absolutely understand! I've just finished a rehab that was 180 hours of MY time, plus laborors (on a small 2/1, no major systems repaired).  I've also looked at several places that I considered, but wouldn't have had the time to fix at the time they were avail, so I've gotten in the habit of crunching an "as is" and a "fixed" scenario, as long as the place is safe and habitable.

@Kyle M. Nice job.  The before and after look great.  What did you do in the bathroom to change the color from blue to white tile?  If you didn't replace the tile, did you have to repair any of grout?

Also, how did you find your 2018 BRRRR? I am in Minneapolis and own two properties (3 doors) and both were MLS. Cash flow is so-so. ROI so-so. Really want to BRRRR, but buying right is my new goal - and that is much harder than just calling my agent. Maybe I don't know the right one! :)

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