Buy, Renovate, Rent, Refinance, Repeat strategy questions

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Hey BP!

I'd love to hear anyone's experience using the BRRRR strategy.

What are some key takeaways from your experience?

What's some things you would do different?

What are the advantages to this strategy?

Can you share/walk us through an example of one "BRRRR" investment?

Thanks for sharing!!!

I have been meaning to update how things have been going, thanks for the lead in Ram J. ! 

My BRRRR story. It starts and ends with a Porsche.

In July 2014 with two kids in daycare I decided using a 50k car to commute was not the best use of my capital.  In August 2014 I sold my 911 Turbo:

I also happened to call on of those bandit signs "we buy houses for cash!" yellow with black letters.  I left a message stating that I was a cash buyer looking to buy in the Lexington area. I got a call back and two weeks later I went to go see this property:

3 bed / 1 bath townhome ~1100 square feet.  built in 1986.  This placed had a crazy cat lady living in it for the past 5-6 years!  I am talking 50+ cats.  one of the bedrooms was used as a litterbox!

I purchased the property from the wholesaler for $14.5k.  closing took 10 days.  He actually owned the property and paid $12k for it 2 weeks prior to me seeing the property.  we were both happy.  Next step was the rehab.

I work full time so for this rehab my major mistake was doing a lot of the labor myself (and only working 1-2 days a week on the property. It took me WAY too long to finish the project. I also had a duplex, a townhome, and a 4-plex that I owned and managed in fall of 2014. 

The smell of cat urine was strong.  I wore a respirator while working in the unit.

I ended up removing all baseboards and trim pieces as the cat pee was soaked into the stuff and behind it. all interior and exterior doors were removed as the bottom hinges were rusted from the cats peeing on it. 

Although the paint looked great in the unit I ended up painting EVERYTHING with Kilz oil based paint. I actually kicked over 5 gallon buckets and rolled the floor thick.  I also bought an ozone generator and rant it each night I was not there. 

Notice the kitchen walls, that is cat poop that ran down behind the cabinets.  There was poop and litter on top of the upper cabinets too.  I am so glad I did not do the initial clean out. it may have scared me away. 

I decided to go with tile downstairs and a vinyl plank upstairs.  I have good luck with the vinyl plank from Home Depot.  it is a floating floor and very easy to install. 

All the hardware was removed and I had a new gas water heater, new gas furnace, and new AC unit installed during the rehab. 

The only part left in the bathroom was the tub.  The rest of the items were replaced.  

This was about December and I as I was driving to the property I passed a house with a FSBO sign out front. I decided to call it and as luck would have it the owners were about 5 min out as they were going to meet a possible buyer. I checked out the new property and had 15 min before the actual investor showed up to inspect the property. I then pointed out issues and my concerns to my handyman as the other investor was in the property. The other investor left to go "run some numbers" but I had already run mine for the past 30 min. I made an offer, wrote a deposit check and we had a closing 2 weeks later. I paid 26k cash.

I can explain more about this project in another thread or perhaps later on.  Back to the townhouse...

The two projects were only 500 yards from each other.  at this point I hired some more local help and had both projects going at the same time.

The townhouse was completed in March 2015. I had an open house for the neighbors and due to me asking too much for the neighborhood and the cold weather my first tenant moved in at the end of March.  Unfortunately they were a couple of drug addicts and they had to leave after only one month.  I nearly shot their dog when it got aggressive.  We decided to part ways.. I have three nice college students in there now and rent is $750 / month. They pay all utilities. 

Dec-March I moved fast on the SFH I purchased just down the street. I ended up hiring up to 3 guys at a time to help work on the property and they worked during the week when I could not. The previous owner had taken the time to level the floors, install a new heat pump system, new electrical service, and put up kitchen cabinets. This investor was doing all the repairs himself but he lived an hour away. He only worked on the place once per month over the last 3 years he owned the place! he was upside down on the process. (do not do it like this!!)

The SFH was a 3 bed / 1.5 bath with a fenced in back yard. Here are the photos of the condition I purchased it in :

This rehab required a different set of fixed than the townhouse.  It required all new plumbing lines ( I went to Pex lines all the way from the street to all parts of the house)  The copper lines were broken multiple places and we had to cut up the floor.  The drain lines were replaced too.  went from cast iron to PVC.

New electric water tank, new appliances, refinished the hardwood floors, new smoke detectors, outlets, light fixtures, carpet in two bedrooms, vinyl flooring in the bathrooms and kitchen, 4 new windows, new toilets, blinds for the windows, insulation in the attic (there was nothing up there!), sealing up lots of air leaks with expanding foam, replacing the front and rear doors, paint the porch, install an handrail, and a few other things I am forgetting I am sure.

If you are still following along at home I have Bought, Rehabbed, & Rented the two units.  Next step was to Refinance then Repeat the process. 

I contacted a local lender to get a portfolio loan on the two properties.  The lender sent an appraiser out to visit the properties. 

The two project costs break down to the below:

Townhome: Purchase $14.5k, Rehab ~$17k including materials and labor (but not including mine), annual insurance of ~$650, Annual taxes of ~$350 rents for $750

Appraised for $58k

SFH: Purchase $26k, Rehab ~$20k including materials and labor (but not including mine), annual insurance of ~$700, Annual taxes of ~$300 rents for $775

Appraised for $72k

I paid cash for everything except around $4k on a HD credit card so that I got )% interest for 6 months. 

My lender was able to do a commercial loan of up to 75% LTV. The terms I got was 5% for 7 years on a 20 year amortization. This makes minimum payments of $508/ month but if I pay 1000/month I will have the loan paid off in just under 8 years. The two units monthly rent is $1525 so I just continue to save the $525 each month which covers repairs, taxes, and insurance. (plus continues to grow) I asked for only $75k as that is in the ballpark of what I spent over the 9 months between the two projects.

I took the $75k and paid my HELOC down, paid off they HD credit card, and went shopping!

I bought this SFH for 26.5k

I moved my handyman into the new SFH and he is doing the repairs while living there for a reduced rent. So that is up and going right away.

In July I partnered with a guy on a duplex which is rented and going well. 3 bed / 1 bath per side (it was turnkey)

I then went out and bought two more 4-plex buildings in August. 

four units are 2 bed / 1 bath, four are 1 bed / 1 bath

in summary I have 20 units and monthly revenue of just over $10k. I hope to triple this in the next 8-10 years.  

I do have some equity in my primary residence and I have it on market, but it is very slow in my area, I am moving to IN from WV and buying a duplex go house hack. So hopefully once it sells I can start.

Do you do anything particular to find distressed properties?

Originally posted by @Andrew Meyer :

Do you do anything particular to find distressed properties?

I call FSBO signs when I drive by them, I get on wholesaler lists, if I see a house I want to know more about I research who the owner is and I reach out with a phone call.

I enjoyed this, especially the granular details and photos on the renovations..every post deserves a vote..you could build this into a short book/blog.....looks like you are doing well for yourself while improving and providing rental housing for others.....

Originally posted by @Michael Boyer :

I enjoyed this, especially the granular details and photos on the renovations..every post deserves a vote..you could build this into a short book/blog.....looks like you are doing well for yourself while improving and providing rental housing for others.....

My brother lives in Juneau Alaska and rents a place!  do you have a few rentals there? 

Originally posted by @Judd Campbell :
Originally posted by @Michael Boyer:

I enjoyed this, especially the granular details and photos on the renovations..every post deserves a vote..you could build this into a short book/blog.....looks like you are doing well for yourself while improving and providing rental housing for others.....

My brother lives in Juneau Alaska and rents a place!  do you have a few rentals there? 

 Wow, small world. I have six units here, pretty tight rental market, but they are building a few new apartments around town. Your brother should think about trying some of your ideas If he has the interest. Demand for rentals still exceeds supply, but the costs, for labor on renovations for example, can be higher.....again, great story you tell on your projects...