1st BRRRR Success(ish)

179 Replies

Hey man awesome thread! I currently own 3 duplexes in Middletown. Renovated them all and they cashflow great. Struggling to get a good appraisal value for them hasn't prevented my BRRRR. I have a house on high street, Grove Street and Erin Street. I would love to know where your place is. I have been in this area for the last 4 years and have seen the change. Dm me with your lenders please!!!

Congrats on the success dude!  It gets addictive quickly if you let it.  I love how you persisted and did not give up on the refi and followed that little inspiration to help the appraiser see things your way.

Sounds like a really good start.  Now set your mind to buy the next one for $100k then you walk with a little more beer money!

@Seth Robbins I believe your right about all that, makes sense. Thank you for looking into it. 

@Anita Effendi good luck! @Charles Holder I chose to switch to gas because it is a 1200 sq ft unit and in my market, heating a unit that size with eclectic heat is expensive and it would be harder to find/keep decent tenants. It will also help the resale of the property down the road. 

I generally knew after the walk through it way mainly cosmetic updates with the exception of the eclectic to gas switch. My contractor DOES come with me on initial walk throughs to verify that everything I 'want to do' can actually be done. He will then wright up a budget and if the numbers work, I submit the offer. 

Hi Micheal. 

Question, I'm looking into doing my first investment via house hacking. I have above 800 credit score, stable income, and able to put 20% down. Should I apply for an FHA loan or conventional loan considering that I'll be buying it as an investment property and live in one side for about 2 years?

@Michael Doherty well done! I encounter this scenario all the time... the cash out appraisal is almost always lower than the appraisal for the hard money loan. Often times people get in there and cut costs since it is just a rental...use cheaper materials, etc. it's the right thing to do rehab wise, but you're correct in that you always have to be very conservative with the ARV in BRRRr deals...perhaps even more so than flips.

@Earl Vincent Torres that is just gross rents for both units. Tenants pay for all utilities except garbage and water.

@Curtis Lewis yeah, exactly Curtis. You find someone (private money, hard money ect…) to fund your deal and then when you are done with renovations you look to refi out of the hard money for a conventional loan. The reason you cant get a conventional loan to begin with is because the house is usually in disarray, so many traditional banks won't touch it. Once they (traditional lender) decide on the value of your property- they will typically give you 75% of that value. That becomes your new mortgage. You then take that new mortgage and essentially pay off the existing hard money loan. So now you have refinanced into a 20 or 30 yr product with hopefully a decent rate and your hard money lender has been paid off in full. 

Feel free to reach out with any additional questions. 

@Stefan Knieling awesome explanation- thank you for the insights. 

@Eric Williams rates and points are two separate things. You have your interest rate which is the interest on your loan you pay monthly and points are a 1 time fee usually paid at closing to the ledner for originating your loan (one of the ways they make money). 1 'point' is usually 1% of the loan amount. 

Ex: you purchase a house for 200k- 40k (20% down)= a loan amount of 160k. If you have to pay 2pts at closing it's going to cost you $3,200 in addition to your other closing costs. 

From my understanding there are some lenders that allow you to 'buy down' the rate by paying points but I have not personally done that. 

@Brandon Johnson The more beer money the better! Definitely learned a lot and can hopefully pull a bit more out on the next one. Thank you for the kind words! 

@Amanda Culleton good luck! Reach out anytime with questions. 

@Alpha Journal REALLY great question. My first investment was a duplex in which I house hacked as well. I only had enough money to do the FHA 3.5% down so the decision was easy. In your case, there's a lot to debate.

You could look at is like: If you put 3.5-5% down you will have a lot more money in the bank can perhaps have the capital to do MULTIPLE deals. Or you could put the 20% down avoid PMI- have a better cash flowing asset- but there's the opportunity cost of not having that additional cash on hand....

Personally.... I would split the difference. I would put down 5-10% on a conventional loan.... I believe there's products out there where you can still have a low down loan (5-10% and STILL avoid PMI insurance). I would have the conversation with different lenders to see what's out there like this. In this option you get the benefit of having a low down loan with additional cash in the bank for other opportunities/ reserves and you still avoid PMI Insurance.

If you end up choosing the low down payment- try and get as many units as you can. That is one regret I have, settling for a duplex when I could have gotten a 4-plex for the same low down payment. Albeit, it will cost you more moeny to aquire but still the same 3.5-5% down.

My PMI payment is $125 a month on a 180k note for reference.

Originally posted by @Michael Doherty :

Here's a recount of my first BRRRR (Buy- Renovate-Rent-Refinance-Repeat) deal with specific details/numbers. This post is long and detailed, but for those who spend the time to read through it, I hope it helps.

How did I found the deal:

I found this deal on the MLS. It was a foreclosure and soon after submitting my offer, I found out another investor outbid me. It wasn't until 2 weeks later, my agent informed me the original investors financing fell through and my offer was accepted.

The Property and Location:

The property is an oversized two family house right next to a major Hospital and University in Middletown, Ct. Unit 1 has 3BR 1B and Unit 2 has 3BR 1B with 2 large rooms in the finished attic. From a location standpoint, I was pretty familiar with the area and believed it would be sought after in 3-5 years. I have already started to see many restaurants and breweries popping up in town.


Listing: $130k 

Purchase Price: $118k

Financing: Hard Money Lender to fund 90% of the Purchase Price, 90% of the renovations for 3pts and 11.5% interest for 12 months no prepayment penalty. I had only done 2 prior deals (no flips) so the rate was slightly higher.

Rehab Budget: $30k

ARV (estimate): $215k

Rent (estimate): $2,800

  • Scope of work: 
    Convert Unit 2 from electric to gas heat. Unit 1 had already been converted so I knew gas lines were in place.
  • Install new on demand hot water system for 2nd floor unit. 
  • Install Luxury Vinyl Plank flooring (LVP) throughout both units (Home Decorators Collection Blue Cedar Grey from Home Depot)
  • Install new counter tops and cabinets in 2nd floor kitchen
  • New Vanity/shower for 2nd floor unit
  • Install 3 new windows
  • Install Sump pump in basement
  • Update washer dryer hooks (each unit)
  • Paint all ceilings/walls/ trim ( Agreeable Grey from Sherman Williams)
  • New appliances for 2nd floor kitchen (used from Facebook Market Place)

Holding Costs: $8,271

  • 4 months of $1,284 interest only payments
  • Taxes
  • Utilities
  • 6 months Builders Risk/General Liability Premium

After all said and done I spent $28,397 (not included holding costs) and was under budget!


I was able to rent the top unit for $1,400 and the bottom unit for $1,375 totaling $2,775.


Because the renovation only took 3 months, I was looking for a lender who would refinance the deal without a seasoning period. After doing some research I came across a lender (found him here on Bigger Pockets) who would do a 75% cash out refi, 30 yr fixed @5.965% for 2.5pts, No seasoning.

When I originally financed the deal with the hard money lender I received two appraisals. The first was an as is appraisal for $120k. It also included a projected appraisal (including the scope of my work) for $220k (5k higher than my ARV!!)

Unfortunately my REFI appraisal came back at $201,500- 17k under the projected appraisal.

My lender then agreed to change the terms to 80% LTV to make this work. Two days before closing they changed their mind and could no longer do the 80% LTV, only 75% LTV. They would not budge and did not let me dispute the appraisal so I ended up dropping them and starting my search over. Moreover, I ended up finding another lender who would finance 75% cash out, 1.5pts, 30 yr fixed at 6.6% no seasoning. Their appraisal it came back @ $200,500- 1k less than the original!!!! At this point I figured I was sh** out of luck and should just eat the difference. However, I ended up writing a very detailed letter to the appraiser explaining why I think certain comps should be used vs others and he ended up increasing the value to $205,000!!!.

So after all said and done here is was the numbers look like:

Hard Money Loan

Hard Money Loan Payoff: $134k

Cash into the deal: $24k (includes 10% down on loan, 10% of rehab costs, closing costs)

Refi: 75% of $205,000= $153,750

Cash out: $153,750- $135k(hard money pay off)= $18,750

Closing costs: $9k (escrowed taxes and Insurance)

Cash left in the deal= $14,250

  • Math behind it: (18,750-9k)= $9,750 (24k-9,750) = $14,250
  • In other words, I was able to walk with a check for $9,750 even though I received $18,750 cash out from the bank. After my initial investment of $24,000- $9750 (check) leaves me with $14,250 left in deal as mentioned above.

  • The house could conservatively sell for $220,000 in its current state. If you were to put a traditional 20% down you would be $44,000 out of pocket w/o closing costs instead of $14,250. THAT is the power of the BRRRR.

Monthly Debt Service

PITI= $1,501

Income: $2,775

Monthly Cash flow before expenses: $774

What did I learn?

Always, Always, Always have a conservative ARV. The appraisal part of the process is the only part that is completely out of your control. Another human is determining your properties value and it is completely subjective. It still boggles my mind that we do not have a automatized system for appraisals yet.

Don’t be scared to fire your contractor at any point in the process. I would personally rather pay a higher rate for a contractor that does not eat up my time/money and can execute the job correctly.

I will most likely use the delayed financing technique described in the forums on my next BRRRR.

Trying to find a lender who does not require seasoning and still has a competitive rate proved to be a challenge

DO NOT let you emotions get the best of you. It's a business, treat it like one. If I didn't get so angry with my REFI lender who changed his terms from 80% LTV to 75% at the last minute- I would be left with a 30 yr fixed rate @5.96% instead of 6.6%.

It still costs money to complete the BRRRR. You need working capital and should have reserves for the unexpected.

What’s next?

I plan on holding onto this asset. Since completely the BRRRR process, I honestly think it is one of the best methods in REI to scale and build wealth. It is NOT a get reach quick scheme, but a way to have a cash flowing asset with all the deferred maintenance complete without having to put the traditional 20% down. I have since partnered with someone and purchased a 3 family. Our intention was to BRRRR but the lack of comps in the area have steered us towards a flip.

Please comment with your thoughts, tips, advice and stories.

Congrats! Much better than the way my 1st BRRR went..

Thank you for taking the time and writing all the numbers, my husband and I are finally ready to take the next step and finding a good deal, in this market. As a first time I appreciate the detailed numbers and also your lessons learned. Yet another reason why I love thos forum! Good luck and kee us posted. Can you explain what seasoning is? 

Hey Michael, Congrats on your first successful BRRRR! The beauty of this method is that it leaves lots of room, so even if everything doesn't go perfectly the deal can still be a success story.

I'm curious, if you'd like to share - what is the cash flow after expenses (utilities, gardener, maintenance, property tax, property management?), and what is the ROI on the 14K you left in the deal?

This post has been removed.

@Michael Doherty

Thanks for the details and numbers. It’s a great story. Congrats!

I have two questions:

- Can you say more about your choice of flooring? Is this the right level for rental? Would you have considered actual hard wood floors for a more durable flooring? Or is that too much $ to make the numbers work?

- I’m also curious what you chose for countertops, and whether you had similar “guidelines” for rental-grade?

I’m about to rehab a rental and want to make sure I neither under nor over invest.


@Ana Klein thank you! All seasoning is: it's the time period you have 'owned' the property for. Most lenders for a REFI like to see you have 'owned' it for at least 6 months. The clock starts from the day you close until the day you close on the Refi. So you can start shopping around for a Refi lender well before the 6 months is up.

Because my renovation was done in 2 months- I didn't want to wait the additional 4 months stuck in a high interest rate- Hard Money Loan, so I was able to find two lenders who will do a cash out refi with NO seasoning. They are harder to find but definitely out there. 

@Marc Sinnott  My monthly Income after debt service is $1274. My monthly cash flow/take home is around $700-750 after accounting for all expenses. Of course they vary each month. 

@Luis Garcia I'd be happy to post some pictures!

@Greg Moore I choose 4mm LVP Flooring Home Decorations Collection from Home Depot, it's about $2 per sq ft depending if there is a sale or not. It's waterproof and can take a real beating before needing to be replaced. You can buy even nicer material and much cheaper material but I found this to be a good happy medium.

If there were hard wood floors under the carpet I ripped up- I would have chosen to refinish them with 4 coats of polyurethane. To lay new hard wood flooring however, would be much more $$$$ than LVP.  My contractor ordered the cabinets and counter tops from a dealer he works with so I'm not quite sure on the brand. I paid $2700 for about 1 wall of uppers/lowers and counter tops including install. The wall is probably 8ft long (I'll post a picture). 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here