Monster 3 unit BRRRR complete!
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!
