I am just wrapping up my first ever real estate deal. I am from Utah and am about to complete the refinance on my first brrr in Indianapolis. Here are some details:
- When: I Purchased the property early in July. Rehab was finished mid August and the property rented in September. Refinance was just completed (late September)
- Location: Littleflower area, Indianapolis. C neighborhood with some potential for appreciation/gentrification.
- Investment Type: 2 Bed 1 Bath SFR.
- How did i find it? Listed on MLS. I walked through the property on Labor day weekend.
- Purchase Price: $30K
- Funding: HELOC funds from equity in my primary residance
- Rehab: New roof, floors, paint, bathroom, kitchen, appliances, and some concrete jacking to help with basement drainage issues. Cost: ~$25000
- Total Investment ~$55000
- Rent: Rented @$725/month
- Refinance: I used the delayed financing exception to cash-out my initial investment. I just signed the papers today. I put ~$24K into a rehab escrow account when i purchased the property, so i was able to pull all that money back out. The initial appraisal came back at $61000, but after i challenged the appraisal and pointed out rehabbed comps in the area, the appraisal was changed to $90K. I was able to get a cash-our refinance for 58K and cover the closing costs of the refinance.
- Cash-Flow: after all expenses (mortgage, insurance, taxes, PM, capex and repairs the property will cashflow ~$150/month
- Cash left in the deal: rehab went over budget so there wasn't enough money in the escrow account to cover the entire project. We'll end up sith ~$1600 left in the deal. If we were to wait until January (for the 6 month seasoning period) we would have been able to pull ~9K out of the deal.
- Repeat: in-progess. i'm working on the 2nd and 3rd deals now.
I am partnering with my brother-in-law on this property 50/50. We decided for our first venture out of state that we could split the risk and both learn as much as possible on a long distance deal. We got lucky and found a fantastic contractor who we can trust. We have a great realtor who is an investor herself and is tied in to the wholesellers in the area. Finding a lender who understands delayed financing and is willing to include the rehabs costs as part of the initial investment was difficult. We also went over-budget on the rehab.
I'm super excited to get this first property done. The goal was to learn as much as possible and hopefully not have to put up too much money. I don't think i could have asked for a better result!
Inspiring and well documented. $1600 left in the deal for not only first BRRRR, but first out of state BRRRR, well done.
Looking forward to hearing about your future successes.
Congrats man! Glad you had success in Little Flower.
And people say that the BRRR is dead. I think not !
Great job @Bret Winegar
What would be the difference in how you financed this deal versus just using the HELOC to pay for the entire scope of the project (house + rehab). Granted I am new but this seems overly complex with the delayed financing and escrow.
The benefit of using delayed financing is the ability to refinance to a conventional 30 year loan without a 6 month seasoning period.
@Bret Winegar Ah, that makes sense. Thanks
@Scott Rogers If I read it correctly he did the delayed financing route because it's faster. You can pull the purchase capital out with out waiting 6 months.
Congratulations on your first ever deal!
@Bret Winegar did you have difficulty finding a lender to make a small loan? I have a property I'm pursuing PP $60k, repair $23k, ARV $115k. One lenders limit lowest amount is $200k for investments. Other one is at 75k. I wanted to finance to purchase but can pay cash from heloc. I'm pursuing a delayed financing too, which may work at those numbers.
So you were able to include the repairs in the loan too? This lender will limit to a % of cost not LTV. Wonder if that cost includes repairs.
Congrats! I’m hoping my first will go as well as yours. Cheers!
@Derrick Lind Most national mortgage brokers will loan down to ~$50K. I used SNMC, but Prime Lending was also willing to go down to 50K
@Bret Winegar Good job man, really inspiring. Be proud of you. Were you happy with your contractor and would you use him again? Sometimes things go over budget but is not necessarily a contractor's fault.
@Juan T. I'm happy with my contractor. I've used him now on 3 additional projects. He doesn't always stick to budget, but he does good work.
@Bret Winegar That’s awesome !!!! Great Job.
Great job on your first property! How did you challenge the low appraisal? Did you provide comps & receipts of the home improvements?
@Bret Winegar Congrats! Well done. You mentioned using delayed financing. What is that and how exactly does that work? Thanks
Thanks!. yes i sent the SOW for the rehab and a list of comps. I have challenged appraisals two additional times now without success. I'm glad it worked on this one.
There are a few posts on BP about delayed financing. The strategy is to put rehab costs into an escrow account when you purchase the property. Then when you go to refinance, you are allowed to get a loan for the "purchase price" without the seasoning requirement. The trick is to find a lender who will interpret the rehab escrow account to be included as part of the purchase price.
Hi, @Bret Winegar . This was a great breakdown of your first OOS deal. I'm also an OOS investor and would love to know how you were able to find your deal. Did you mainly lean on your agent and the MLS, or did you use other methods as well?
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