Monster 3 unit BRRRR complete!

123 Replies

yah fantastic job, @Kyle M.!  way to hang in there... I'll bet there were times you were wringing your hands and wondering if you were going to get through it!  

and @Christine Z. , who the heck puts a giant 'H' in their turquoise shower?  in ANY era?  hilarious

I wondered about your 80% LTV cash out loan.. was that a local lender? right now I'm only finding 70% LTV on a cash out, which sort of sucks...

Also, do you know, on the appraisal, did they use comps or income approach to come up with value?  or a ccombination?   I bet there werent' many comps around at $300k on a triplex, if you're saying rents have very recently gone up dramatically.  reason I ask is because I"ve had lenders tell me that they don't go off cap rates on anything less than a 5 plex... yet I, and a lot of the investors I know, always use cap rates in order to compare apples to apples when buying, and I"m selling some 4plexes in Kansas City that the comps only show $270k but the income easily points to the low $300's.

Thanks in advance!

Great Job!!!

I am in the process of obtaining my first property. it is a vacant lot, over 1/3 acre, zoned multi family per the Realtor though he suggest to verify this with the city. I am hoping to put two duplexes on the property. I have funding lined up (100% of the purchase price and 100% for construction). I also have a title company doing research on the property to make sure the seller is indeed the owner, free and clear. All utilities on the property. Am waiting for confirmation from the city of Centralia, Washington on the multi family zoning. Have the General Contractor lined up as well as a landscaper. Centralia Washington is a small college town, only about 4,000 students and there is a housing shortage.  

I should have no problem leasing out the property.

But back to you, again great job. I hope to be as successful at my venture as you with your.

Originally posted by @Kyle M.:

Thanks! This one is on Market Street in New Cumberland.  The entire West Shore is an awesome rental area!

That sounds like a great deal and better job bringing it home. 

I'm also interested in how you got the 80% LTV. Every lender I'm talking to is telling me 75% on single and 70% on multi. And these are Fannie direct lenders. Did you get a commercial or portfolio loan?

That is awesome rehab work and great job..........my only question is whether $500 positive cash flow is really a great "prize" after all of the work and effort you had to put into this? Just wondering if the ROI was "worth it" in the long run.........

Originally posted by @Jay Schultz :

@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! :)

Thanks! My GC had a guy come in who sprayed some crazy epoxy paint on the tile.  The grout was in decent shape and didn't have to be replaced.

I found my 4 BRRR's from: MLS, word of mouth (neighbor), direct mail, and pocket listing from agent.

It's so hard to find deals...probably the hardest part of the process.  The rest is just execution.  I feel like you find good deals by doing deals.  Momentum is so huge.  Once you start to get some wins, people talk, and then word of mouth takes it from there.  The beginning is the hardest part...you almost have to do a couple mediocre deals just to get people talking and build up your network.

Originally posted by @Alan Brown :

yah fantastic job, @Kyle M.!  way to hang in there... I'll bet there were times you were wringing your hands and wondering if you were going to get through it!  

and @Christine Z. , who the heck puts a giant 'H' in their turquoise shower?  in ANY era?  hilarious

I wondered about your 80% LTV cash out loan.. was that a local lender? right now I'm only finding 70% LTV on a cash out, which sort of sucks...

Also, do you know, on the appraisal, did they use comps or income approach to come up with value?  or a ccombination?   I bet there werent' many comps around at $300k on a triplex, if you're saying rents have very recently gone up dramatically.  reason I ask is because I"ve had lenders tell me that they don't go off cap rates on anything less than a 5 plex... yet I, and a lot of the investors I know, always use cap rates in order to compare apples to apples when buying, and I"m selling some 4plexes in Kansas City that the comps only show $270k but the income easily points to the low $300's.

Thanks in advance!

The gigantic "H" - :) 

There were a few H's in the house, the previous family was "Horgan", so I think that had something to do with it!

I found a local portfolio lender that does 80% LTV loans at 30 yr amortization. Fixed for 10 years, then the rate adjusts. I have 4.25% locked for 10 years. No seasoning period and they lend to LLC's. This was a huge find and an absolute game changer in my opinion!

For the appraisal: cap rate doesn't matter on 1-4 units.  Sure as investors we like to throw around cap rates.  But it just doesn't matter on the appraisal for 1-4 units.  I have found that appraisers kind of have no idea how to get good comps for 2-4 unit properties so they just use the 1% rule and massage their adjustments to make the numbers work.  So, my gross rents were $3,000 and property appraised for $306,000.  Suspiciously close to the 1% rule! (they use Gross Rent Multiplier on their appraisal form, but same difference)

Originally posted by @Donald S. :
Originally posted by @Kyle M.:

Thanks! This one is on Market Street in New Cumberland.  The entire West Shore is an awesome rental area!

That sounds like a great deal and better job bringing it home. 

I'm also interested in how you got the 80% LTV. Every lender I'm talking to is telling me 75% on single and 70% on multi. And these are Fannie direct lenders. Did you get a commercial or portfolio loan?

 See above post, portfolio loans are the way to go!

@Kyle M. when you say portfolio lender, do you mean they only lend on a whole portfolio of properties or would they do, say a single family rental?  That is a great find and would be interested if they would do the same for our single family in the area.  

the "H" was amazing haha

Originally posted by @William P Korbin :

That is awesome rehab work and great job..........my only question is whether $500 positive cash flow is really a great "prize" after all of the work and effort you had to put into this? Just wondering if the ROI was "worth it" in the long run.........

 Fantastic question! Quick math: $500/month X 12 = $6K/yr.  I was left with about $36k in the deal.  That's a 17.6% cash on cash return.

Was it worth it? Yes, for the learning experience. Would I seek that kind of return in the future on this kind of project? Absolutely not. With the amount of work you need to put into a BRRRR, I always want to shoot to get all my money back on the refinance for infinite returns.

Here's another way to look at it though: if this property was listed as a turnkey rental (post rehab) on the MLS in this crazy market, it would sell for $300K. Someone would put (best case) a 20% down payment plus closing costs into this property, which would amount to lets say $75k. That's more than double the cash that I have in the deal, for only a 8% cash on cash return. So, for all that work, I got the property for 50% off. Plus, I have built in equity.

Originally posted by @Josh Brown :

@Kyle M. Incredible work! Being stretched is painful but you'll never return to your previous state. What's next?

 You're absolutely right.  I am a big believer in stretching yourself.  My dad always said "one man's ceiling is another man's floor".  I think the only way to reach the next level is by taking on projects that are ALMOST too challenging and forcing yourself through it.

What's next? More multi-unit BRRRR's. I've acquired and am working on two 2-units with a partner, and we are getting in contact with owners of larger properties (for example, we've had some real good talks with the owners of a 6 unit).

Originally posted by @Christine Z. :

@Kyle M. when you say portfolio lender, do you mean they only lend on a whole portfolio of properties or would they do, say a single family rental?  That is a great find and would be interested if they would do the same for our single family in the area.  

the "H" was amazing haha

Portfolio lender means they do not sell the loans to Fannie/Freddie.  The bank instead keeps the loan on their books (i.e. they hold it in their own portfolio).  These lenders are absolute gold mines because they don't have to adhere to the ever changing Fannie/Freddie guidelines.  It is much more relationship/track record based.

Kyle answered the questions re the painting of the bathroom tiles, but I thought I'd expand a bit on it for those who rehab in other locations.  I believe that the types of companies and franchises which advertise that they redo old bathtubs to look new (not the companies which reline old tubs, that is a completely different process), will also spray older tiles on the walls if they are soundly adhered.  They spray right over the grouting too, of course, so there is no need to regrout.  But like with the tiles, the old grout needs to be sound and not flaking, etc.  It's probably more expensive to do it through a separate company than to have your GC's guys do it like Kyle did, but pricing it out is the only way to find out.  I'm in a HCOL area, and I was quoted ~$6sf to epoxy paint the wall tiles a few yrs. ago.  Not by a national franchise company, but a long-established local company called "Mr.Ugly".  At the time, I wondered if it might end up costing the same to tear out the old tiles and install new.  Never went ahead with it though, so I didn't get the chance to compare.

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