First BRRRR Finalized!!!!

9 Replies

I am happy to say my first BRRRR is officially completed. We purchased a property November 2016, thought was going to take 3 months to renovate, ended up taking a year, got rented right away and then nothing for 7 months.

Then, we put offer in on a rental property for students housing at university. Deal was struck but one problem, had no funds for closing. Great news had property we renovated with over 140k in equity in it. Had our credit unit do a HELOC on the investment property, pulled out 85k then took 21k of it to use for closing cost on new property which settled today. Everything thing worked great and best part of HELOC is we are only paying on cash I need to use at this moment. Now still have 64K left which planning on using to secure 2 to 3 additional properties. After closing today went and toured a home that may be possibility. Amazing that I possibly will be able to use one house to secure 3 or 4 other homes.

Anyone out there still on the fence, BRRR works and is a great way to go. We lucked out that this next rental needs less than 2k in work, already has 2 tenants signed up and was able to secure a 3rd before even settled on property. Heck, not only did I secure a tenant for a 2 year lease, she paid first 6 months rent at once, before I even owned the property. Student rentals with well to do parents are a wonderful thing! Mom even asked if would be okay if she paid every 6 months so that she doesn't have to worry about paying it every month. That will be just fine!

We were able to secure this house for 78k, mortgage with taxes and insurance is going to be $432 and will be bringing in $1125 a month. After expenses we should be cash flowing about $525 a month and have zero of my money in the deal. Oh, and house was on the MLS and got same interest rate I got over a year ago on first property. Deals are out there people, you just need to find them and make it work.

Thank you BiggerPockets for all the wisdom and confidence you have given my wife and I to venture into the world of real estate investing.

That’s awesome! How easy was it to get a HELOC on a rental? I am considering doing a BRRRR but haven’t worked out all the questions I have yet. Did you rehab yourself or hire it out? I’d love to know more.

Surprising was super easy to get HELOC. Funny part is they wanted no part a year ago of financing a rental, but they sure changed their tune.

We did rehab ourselves which is why took so long.  Not enough nights and weekends in a week.  After the holding cost I would of been much better off paying a contractor for many more things.  But either way was a great education.  I will glady share all that I know.  Anything specific you looking to know or understand?

That’s one of the question I find myself without an answer. Do I rely on someone else to do the rehab (against my nature as I just completely gutted and rehabbed our personal residence from top to bottom). Also how distressed are you comfortable going? And did you you a small local bank for your loan and refinancing?

@Shane Albert

I had the same struggle and still do.  It all comes down to time and money it cost to do yourself.  We had to do a lot to the first house.  House was a log home built in mid 1800's with 2 additions built onto it over the years.  We had to redo all the plumbing, add a ton of electrical, fix lots of drywall, convert one room from a large recreation room to a bedroom, bathroom, closet, and laundry room, completely redo another bathroom, replace windows and exterior doors, add a kitchen where there wasn't one, paint entire house and flooring.  Ended up with a 4 bed, 2 bathroom house.Was a huge undertaking.  Best thing I did was hire out drywall work. They got done in 3 days what would of taken me a month to do.  

I figured it would cost us about 30K do do the work ourselves which were were faily close on, ended up at about 33K.  But, carrying the house for a year, plus utilities cost us almost 10K in out of pocket expense, then all the additional rental income missed over that year, which would be about 8K we really lost another $18k.  So honestly we had just over $50k into renovation.  I could of spent that money on a contractor to do a majority of the work and been out of the house much faster.  That is when I realized while I saved myself money, in the end I cost myself money.  Still would of done some work myself but should of hired out the bigger projects.  

As far how distressed you go, that all comes down to the numbers. Figure out how much you are going to have into the property and if you will recover your money in a timely manner. We bought the house for $100k, put the above $55k into renovation and holding cost, and have a house now valued at $225k. At end of day we got our all money back with HELOC, have a mortgage payment of $623 on property, collect $1450 a month of rent, and have minimal expenses on property. I set aside $100 a month for misc expenses. We are making an just over $700 a month cash flow on property. As for cost of HELOC, that is going to be spread accross the other properties purchased and figured into their cash flow numbers.

Used a national bank for orginal purchase and HELOC. Went to all local banks in area and rates were higher and more pain in the *** than the big guys were. Seems backwards of what everyone else is saying but so far working for me.

The house purchased yesterday I spent day doing small projects-door locks, replaced a door, added alarm and home automation system for remote management, and fixed a leaking plumbing valve.  Paying a contractor to replace front steps and some drainage lines for gutters.  My thought now is that is it is going to be able to be done in 2 days or less I will probably do the project, longer and more in depth projects will be contractred out. Besides, the house paying for the work being done with cash flow, why not let it make my life easier.

This is amazing information. Thanks for being so forthcoming with the info. I'm applying for a HELOC tomorrow, I've made up my mind!

Can you tell us how you found the deal and how you analyzed it? Did you run comps on it? What type of neighborhood/location did you buy in?

Originally posted by @James Barnes :

This is amazing information. Thanks for being so forthcoming with the info. I'm applying for a HELOC tomorrow, I've made up my mind!

Can you tell us how you found the deal and how you analyzed it? Did you run comps on it? What type of neighborhood/location did you buy in?

Deal was on MLS. Made offer 3 different times, was rejected twice because they thought could get more money. After 2 other deals fell apart came back to me. Paid 8k more than I wanted but numbers still worked.

Evaluating was fairly simple.  I knew house was worth at least 200k once renovated and my realtor confirmed the value and made a detailed list of what wanted to do and what was going to cost me.  From that I inputted into my spreadsheet, got my numbers I look for and was happy with deal.  When all was done I am self managing property so cash flow is great-over $700 a month, so my repayment period for all my money was within what I deemed acceptable so went for it.  I keep it simple.  If I can't evaluate a property in my head and get a rough idea on the spot if it will work, its not worth my time.  I use spreadsheets and other resources to confirm my mental and napkin math.  

If there is something specific you are looking for let me know when it comes to info on the how on my methods I can go into greater detail.  BiggerPockets has helped me immensely, I look to give back as much as I can.