Another BRRRR, Another "Free" Property

Real Estate Agent · Brentwood, CA · Member since 2018 · 285 posts · 225 votes

It's still a surreal feeling when you do your due diligence, research and run numbers correctly and get a check back for the exact amount you put in.

We found this one from a Wholesaler in the area and we jumped on it. Older individual owned it and let it go. We put in new flooring, paint, updated bathrooms, tore down the detached garage and installed a new carport.

St. Louis MO (2 Blocks from Carondelet Park)

Purchase Price - $55k

Rehab - $40k

Closing Costs (Including down payment) - $13,131

Appraised - $145k

All In - $95k

Rent - $1200

Refinanced and pulled out $13,200

Cash out of Pocket - $0

Cash Flow - $295/month

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Originally posted by @Blake Edwards:

@Jay Hinrichs - Wow... Thanks Jay (Or should I say Mr. Hinrichs). I see you active on these forums a lot giving out great free advice. I look at it as an honor you saw & replied to my post. Thank you for the kind words.

We agree, a good relationship with your lender whether it be a bank, HML, or Vinny from down on the corner is key. That's how we were able to finance our $18k property as well ;)

We thought it was a cute house as well and in the back of our minds kept thinking we were missing something because it was such a good deal. Just We could have easily talked ourselves out of it. Goes to show you the power of taking action.

there are a whole new crop of investors.. however the BRRR strategy was invented in LA for out of area deals exactly like yours.

and my company played a prominent roll in it from 2001 to 2008 when it all came crashing down :) IE refi's FRoze like antartic.. its has taken a decade or so to get the banks to come back to this model IE cash out refi's.

In my day it went like this.

LA investor listening to a Saturday morning real estate radio show hosted by Mike Harris ( he is still on by the way) at least he was last year. it was called real estate round table.. he would talk about investing and mortgages and they created leads.. those leads would then go to providers in the mid west.. and those providers would rely on my HML company to make the loan to the LA client for purchase and rehab. Mike would have the buyer all approved up front for the take outs.. and we usually did 2 to 4 at one time.. So I required the solid underwriting Mike did and proof of take out.. and the LA buyer would have to put 1k down per house.. I would then lend the money to them and they would buy from one of my mid west vendors .. mid west turnkey vendor would then buy and rehab .. once rehab was done we already had the ARV appraisal done for the refi.. it was just a matter of getting a 442 reinspect and closing.. my average HML turn over in 91 days and I did about 60 of them a month for LA based and San deigo based investors with some in the Bay area and other parts of the country but SOCAL is 90% of the buyer base that's why all the marketing channels for turnkey are pretty much based in Socal and or CA.. its where the buyers come from you know the story... prices to high in CA need to go out east.

So now we put LA investor into 4 homes day one for 4k out of pocket.. they get rehabbed and refi goes through they get 5 to 10k cash back per home.. so they get their 4k back plus 16 to 30k in their jeans.. and in those days cash flow was 100.00 a house..

We were all printing money back them LOL.. But 08 hit and I got stuck with 450 loans on the books that could not refi because refi lenders Country wide Wells etc all pulled out of the market.. so I ended up foreclosing on about 200 LA investors and owing the homes. Only to have the values of rentals drop like a rock.. so we got hammered very hard.. but that was then and now is now.

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Sophia Coleman
Real Estate Broker · Chicago, IL · Member since 2019 · 23 posts · 10 votes
7y
@Blake Edwards This is awesome! I’m back and fort on a deal that I can afford to pay cash for, but it needs cosmetic work done! Blake I’m wondering which route to take for the cosmetic loan?
0 Reply
Blake Edwards
OP
Real Estate Agent · Brentwood, CA · Member since 2018 · 285 posts · 225 votes
7y
@Sophia Coleman I wouldn’t pay cash. Use a bank for the entire thing. Purchase, rehab, refi. No need to tie up all your money when you can put 20% down, get reimbursed while the cosmetic work is taking place, and refinance into a conventional loan. Whether it’s cosmetic or a full remodel I would always advise using a small local bank that understands the rehab/ construction loan process and your strategy.
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Blake Edwards
OP
Real Estate Agent · Brentwood, CA · Member since 2018 · 285 posts · 225 votes
7y
@Greg Edwards
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Sophia Coleman
Real Estate Broker · Chicago, IL · Member since 2019 · 23 posts · 10 votes
7y
Thank you so much, I was leaning more towards a small bank, and you’ve just confirmed it all!! Thanks Blake.
0 Reply
Darlington Agu
Rental Property Investor · Los Angeles, CA · Member since 2018 · 56 posts · 17 votes
7y
@Jay Hinrichs
I plan to do my first BRRR in the Winston-Salem NC area. Would you have any suggestions as to how to find and create a good team ?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Darlington Agu:

@Jay Hinrichs
I plan to do my first BRRR in the Winston-Salem NC area. Would you have any suggestions as to how to find and create a good team ?
I think David Greene wrote a book on it.. but uber caution is to be used..
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Earl Hatmaker
Specialist · Dayton, OH · Member since 2018 · 59 posts · 41 votes
7y
@Jay Hinrichs haha, people write books on real estate? Stop giving away all the secrets!
1 Reply
Stephen FryerPro Member
Investor · Ottawa ON / South Bend, IN · Member since 2013 · 186 posts · 93 votes
7y
Hey @Blake Edwards. Great job.
I live in Ottawa, Canada, and invest in South Ben IN. Nice to see others that have successfully put together a great team and are doing deals in other markets. Keep up the good work and please continue to share your successes. They keep us all motivated. Two thumbs up!
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Brandon Bartley
Lender · Charleston, SC · Member since 2014 · 36 posts · 19 votes
7y
@Blake Edwards Congrats! Looks like a great deal. BRRR investing is definitely something I have put down as a goal of mine in the near future. It's great to see the details of deals like this for motivation!
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Michael Ealy
Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
7y
Congrats on a successful deal.
If you tell a stock broker how much is your ROI on this deal he won't believe you. Warren Buffett average 20% ROI/yr. Your deal here has INFINITE returns :-)
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Wesley WhiteheadPro Member
Rental Property Investor · Depends on where my employer sends me · Member since 2018 · 171 posts · 142 votes
7y
@Blake Edwards Congrats!
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Ryan Rea
Real Estate Agent · Hartford, CT · Member since 2018 · 41 posts · 15 votes
7y
@Blake Edwards awesome job bro. Textbook strategy. I love it
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Edward J Kubic III
Contractor · Navarre, FL · Member since 2019 · 1 post · 0 votes
7y
@Blake Edwards Thank you for taking the time to post for us new investors. I’m as green as a spring lawn and personal stories with the numbers this easy to understand is priceless.
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Dustin Ruhl
Flipper/Rehabber · Indianapolis, IN · Member since 2015 · 204 posts · 89 votes
7y
@Blake Edwards I have had a lot of success in Indianapolis using the BRRR method. Definitely agree with @Jay Hinrichs that the Midwest is an area that you can execute the BRRR. Happy to chat with anyone that is looking into a new market.
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Blake Edwards
OP
Real Estate Agent · Brentwood, CA · Member since 2018 · 285 posts · 225 votes
7y
@Michael Ealy thanks! Yes we’ve done some quick and dirty calculations and it’s mind blowing to see what’s possible
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Blake Edwards
OP
Real Estate Agent · Brentwood, CA · Member since 2018 · 285 posts · 225 votes
7y
@Stephen Fryer thanks man. It’s motivating to experience it first hand and see that it’s really possible
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Blake Edwards
OP
Real Estate Agent · Brentwood, CA · Member since 2018 · 285 posts · 225 votes
7y
@Wesley Whitehead thanks man!
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Blake Edwards
OP
Real Estate Agent · Brentwood, CA · Member since 2018 · 285 posts · 225 votes
7y
@Ryan Rea thanks!
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Blake Edwards
OP
Real Estate Agent · Brentwood, CA · Member since 2018 · 285 posts · 225 votes
7y
@Edward J Kubic III thanks! I can barely tie my own shoes so laying out numbers and our spreadsheet which is simple and easy to understand is key for me. To sound pretentious for a second.... Leonardo DaVinci said “Simplicity is the Ultimate Sophistication”. I saw that on a box of tea packets once.
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Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
7y
Originally posted by @Blake Edwards:

@Sophia Coleman I wouldn’t pay cash. Use a bank for the entire thing. Purchase, rehab, refi. No need to tie up all your money when you can put 20% down, get reimbursed while the cosmetic work is taking place, and refinance into a conventional loan. Whether it’s cosmetic or a full remodel I would always advise using a small local bank that understands the rehab/ construction loan process and your strategy.
Awesome deal, Blake. Thank you for sharing and staying on to answer questions from folks.
Could you speak to closing costs (for both loans) and seasoning before the refi (did you wait 6 months?) ? I see a lot of BRRRs surprised by both- the high cost and the seasoning requirement. One recently costed the guy $7k to get $48k out after having to wait/season for 12 months.
Sophia, I buy with cash and it works well for me. If you have the $ available and are sure of your value going in (don't need value confirmation of a bank appraisal) your closing costs will be at least $3k lower.
Plus much less time and the pain qualifying for the loan requires. My last cash buy all in had closing costs of $417, I didn't have to wait 45 days or submit 18 different financial docs. You can always refi later and enjoy the costs and process then.
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Sophia Coleman
Real Estate Broker · Chicago, IL · Member since 2019 · 23 posts · 10 votes
7y
Ok Perfect! I’ve really been reading a lot of messages and feedbacks on forum and I must say it’s been really helpful.
The property I’m considering is priced at 28k with light cosmetic work about 30-35K, so I was back and forth on should I finance or seek a loan from a small bank.
I really have to sit down a go over my numbers again with all the information I’ve been seeing from investors here on bigger pockets.
Thank you for your the information!!
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Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
7y
What really impresses me are people who manage to do this from out of state. I must be a control freak because I visit my properties daily during the construction phase.
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