My first BRRRR deal in Rochester NY

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My first BRRRR deal in Rochester NY

Brett Schickler
Investor · Rochester, NY · Member since 2014 · 48 posts · 39 votes

Hello, Im currently working on my 2nd deal however this is 1st attempt at using the BRRRR strategy. I have a short sale under contract and I'm set to close at the end of the month. I would like to throw the numbers out here and see if theres anything I'm missing? The property is a single family home in a nice area of the city with a high rental demand, the purchase price is: $65,000 repairs: $19,500 ARV is between $115,000 -$120,000. I have a bank that will allow me to refi at 80% of ARV after 6 months. I believe the property will conservatively rent for $1350 per month if not more. I've run the number's several times and it looks like the property will cash flow $220+ per month (after the refi) and I should be able to refi most if not all of my original investment out after the 6 months seasoning period. Is there anything that I'm missing here?

$65,000 (pp) + $19,500 (repairs) = $85,000

ARV $115,000 x 80% =$92,000

Ive used the BRRRR calculator and as far as i can see everything looks good. I would really appreciate any feed back from some seasoned investors.

Thanks!

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Steve SantacrocePro Member
Rochester, NY · Member since 2013 · 101 posts · 48 votes
9y

You're missing the closing costs (once for the short sale, and once for the refi mortgage) and holding costs (how many months to rehab * taxes & insurance).

First close prob be around 2k. Then the refi prob around 4-5k. If you can rehab it in a month, you're looking at about 2 months to close on the refi, so 3 months holding costs. 

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  • Steve SantacrocePro Member
    Rochester, NY · Member since 2013 · 101 posts · 48 votes
    9y

    You're missing the closing costs (once for the short sale, and once for the refi mortgage) and holding costs (how many months to rehab * taxes & insurance).

    First close prob be around 2k. Then the refi prob around 4-5k. If you can rehab it in a month, you're looking at about 2 months to close on the refi, so 3 months holding costs. 

    2Reply
  • Brett Schickler
    OP
    Investor · Rochester, NY · Member since 2014 · 48 posts · 39 votes
    9y

    Thank you! I did allocate $6k in closing costs when using the BRRRR calculator. I also set aside $4000 for the holding period, my GC is estimating the rehab should take about a month to a month and half. I really appreciate the feed back. Thank you so much for the help!

    2Reply
  • Steve SantacrocePro Member
    Rochester, NY · Member since 2013 · 101 posts · 48 votes
    9y

    No problem, good luck!

    1Reply
  • Account Closed
    Contractor · Los Angeles, CA · Member since 2015 · 887 posts · 323 votes
    9y

    @Brett Schickler I too am looking to implement the BRRRR strategy. Would greatly appreciate it if you would keep us posted on this property you are talking about for educational purposes. Good luck.

    Jorge

    1Reply
  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    9y

    @Brett Schickler How much did you put down? What type of lending are you using? It looks to be a pretty solid deal based on the numbers you provided here. Almost at the 70% rule of thumb.

    0Reply
  • Brett Schickler
    OP
    Investor · Rochester, NY · Member since 2014 · 48 posts · 39 votes
    9y

    @Jorge Ruiz I will definitely update you on the status of the deal as it progresses!

    0Reply
  • Brett Schickler
    OP
    Investor · Rochester, NY · Member since 2014 · 48 posts · 39 votes
    9y

    @Brian Garrett Im putting 15% of the 85k down. I decided to go with a conventional rehab loan @ 4.75%. I was going to use a HML but I felt a little bit more secure using a bank at least for my first one. Had a ton of red tape to jump through with this loan but overall the money is pretty cheap...

    0Reply
  • Brett Schickler
    OP
    Investor · Rochester, NY · Member since 2014 · 48 posts · 39 votes
    9y

    @Brian G. Thank you very much for your feed back as well, it's greatly appreciated!

    0Reply
  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    9y

    @Brett Schickler So you're putting $12,750 down, $6k closing costs and $4k holding costs makes you're out of pocket investment $22,750 total. If you get 80% LTV based on ARV of $115k that would cash you back out $92,000 as you mentioned. $92,000 (cash out refinance value) minus $95,000 (total investment) leaves you with $3k of your own cash still in the deal which you'll easily make right back up through the positive cash flow. Is this how you're seeing it as well?

    1Reply
  • Account Closed
    USA · Member since 2017 · 102 posts · 62 votes
    9y

    Thanks for posting this Brett. I am new to REI and i learned a few things from reading this. Good luck.

    0Reply
  • Brett Schickler
    OP
    Investor · Rochester, NY · Member since 2014 · 48 posts · 39 votes
    9y

    @Brian Garrett Those are literally my exact numbers. Im confident the reassessment will come in at $115k based on the comps for the area. There was a similar house that sold down the street a few weeks ago that has less SqFt, same age, 3 bedrooms, 1 bath that sold for $120k. The property I'm purchasing is +300 SqFt, 4 bedroom, 1.5 bath. So I'm using my "worst case scenario" anything above $115k for the appraisal would just be icing on the cake!  

    0Reply
  • Brett Schickler
    OP
    Investor · Rochester, NY · Member since 2014 · 48 posts · 39 votes
    9y

    @Account Closed Well that makes two of us! If would ever like to chat REI. Inbox me anytime and thanks for the encouragement!

    0Reply
  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    9y
    Originally posted by @Brett Schickler:

    @Brian Garrett Those are literally my exact numbers. Im confident the reassessment will come in at $115k based on the comps for the area. There was a similar house that sold down the street a few weeks ago that has less SqFt, same age, 3 bedrooms, 1 bath that sold for $120k. The property I'm purchasing is +300 SqFt, 4 bedroom, 1.5 bath. So I'm using my "worst case scenario" anything above $115k for the appraisal would just be icing on the cake!  

     Makes sense and it's always smart to use "worst case scenarios" for some extra cushion!

    0Reply
  • Brett Schickler
    OP
    Investor · Rochester, NY · Member since 2014 · 48 posts · 39 votes
    9y

    @Brian Garrett Thanks for the feed back and looking over my deal. This website is such an amazing resource. Greatly appreciate your time Brian. 

    0Reply
  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    9y

    @Brett Schickler No problem!

    0Reply
  • Isiah Ferguson
    Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
    9y
    Originally posted by @Brian Garrett:

    @Brett Schickler So you're putting $12,750 down, $6k closing costs and $4k holding costs makes you're out of pocket investment $22,750 total. If you get 80% LTV based on ARV of $115k that would cash you back out $92,000 as you mentioned. $92,000 (cash out refinance value) minus $95,000 (total investment) leaves you with $3k of your own cash still in the deal which you'll easily make right back up through the positive cash flow. Is this how you're seeing it as well?

    I'm trying to understand your analysis. Soo he's $22,750 total in the deal which includes down payment and closing/holding cost. He refi at 80% LTV at an ARV of 115K that would cash him out a 92k. With 92k he pays back his original loan of 85k which leave him with 7k remaining correct ? How did you guys get 3k left in the deal ?

    0Reply
  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    9y

    @Isiah Ferguson He actually has $95k into the deal. You have to count the $6k for closing costs and the $4k for holding costs as part of the total.  So the $95k minus the $92k leaves $3k.

    0Reply
  • Isiah Ferguson
    Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
    9y
    Originally posted by @Brian Garrett:

    @Isiah Ferguson He actually has $95k into the deal. You have to count the $6k for closing costs and the $4k for holding costs as part of the total.  So the $95k minus the $92k leaves $3k.

     so the initial is 85k (65k purchase + 20k repairs = 85k) plus hold and closing which is an extra 10k that makes in 95k in with a $22,750. So with the 92k cash out where does he pay himself back if his pays the loan at 92k. what am I missing ?

    0Reply
  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    9y

    @Isiah Ferguson I'm not following you. He pays himself all besides the $3k back.

    0Reply
  • Account Closed
    USA · Member since 2017 · 102 posts · 62 votes
    9y

    Thanks Brett, I might just take you up on that!

    0Reply
  • Isiah Ferguson
    Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
    9y

    @Brian Garrett OKAY, I GET IT NOW. 15% OF 85K = $12,750 WITH CONSIDERATION OF CLOSING/HOLDING HE WILL BE ALL IN $22,750 ALL IN. WITH 15% DOWN, NOW HIS LOAN AMOUNT IS FOR $72,250. NOW, YOU REFI AT 80% OF 115K WITH GIVE YOU 92K. WITH THE 92K HE PAYS OFF THE PREVIOUS OF 72K FROM THE 85K LOAN. FROM 92K HE PAYS OF THE 72K + HOLDING/CLOSING COST WHICH IS ROUGHLY 10K TOTAL WHICH = 82K. HE PAYS HIMSELF BACK 10K FROM THE REMIANS AND STILL HAS ROUGHLY 3K STUCK IN THE DEAL. I'M STILL MISSING SOMEHTING, I FEEL IT SMHHHHHH

    0Reply
  • Clementene TaylorPro Member
    Rental Property Investor · Fort Worth, TX · Member since 2016 · 24 posts · 1 vote
    9y
    This is an awesome post I'm currently considering this strategy as well and this really helps a lot.
    0Reply
  • Brett Schickler
    OP
    Investor · Rochester, NY · Member since 2014 · 48 posts · 39 votes
    9y

    @Isiah Ferguson You're pretty close. (PP) 65,000 + (reno) 20,000 = $85,000 + (closing cost, upfront + refi ) $6000 + (holding costs) $4000 = (Total investment) 95,000.

    after 6 months a separate bank will allow me to have the property reappraised based on the repairs and renovation. They will give a new loan up to 80% of the new value ($115,000)

    ARV =$115,000 x 80% = $92,000

    Im all in @ $95,000 (total investment between me & my lender)

    Now my initial lender gets paid first after the refi to pay off the orgininal loan.

    $95,000(org loan) - $92,000(New loan) = $3,000

    So if everything goes to plan I now own a cash flowing rental for $3,000 out of my pocket.

    2Reply
  • Brett Schickler
    OP
    Investor · Rochester, NY · Member since 2014 · 48 posts · 39 votes
    9y

    @Clementene Taylor Thanks for the feed back. I'll keep you posted on how the project works out!

    0Reply
  • Jason V.
    Investor · Rochester, NY · Member since 2016 · 477 posts · 426 votes
    9y

    @Brett Schickler I think we're all in agreement that your BRRRR numbers are correct (nice find on the property too) - how about sharing your rental assumptions as well?

    What part of the city is the property in? SFRs selling for $120k at market price, and renting for $1300+ sounds pretty decent. 

    0Reply
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