Today is a big day for me- my 1st tenant is moving in. Back in April of this year we started down the road of BRRR. Here is a link to the thread: https://www.biggerpockets.com/forums/223/topics/19...
So the numbers:
Rehab: not quite done (fixing third unit) but @50,000
Rent: 2700 total of which we have 1st unit $950, and 2nd unit $900 rented.
Refinance: that will start in October
Repeat: oh yeah, it will be happening
Top line house value: 200,000
So we will be able to refinance out $140,000 approximately. This will be a $10,000 in to acquire a $2700/month top line income asset with approximately a $40,000- $50,000 equity gain.
1) Everything takes longer than you think- just factor that in.
2) Getting your part list down the first time is painful. Make sure you record exactly what parts you like and don't so next time you don't need to spend time deciding.
3) HVAC work will take more time to schedule at the peak turn of the season. Remember this.
4) PEX is wonderful, and ProPex I am a fan of
5) When buying a REO the amount of deferred maintenance should not be underestimated.
6) Sometimes it would cost less to demo out things than repair them- make sure you factor which is more LABOR and material efficient.
Excellent job! Sounds like you are well on your way to success - very nice that you will have what sounds like about $1k/month clear on this after you refi! That is the way to do real estate :)
Time to add the next chapter of this journey. We just finished re-roofing the house and got the appraisal done. In the end we will close the 1st BRRR loop of our investing career. with a 100,000 purchase 55,000 in renovation costs (lessons learned!), and a 140,000 cash out on a 190,000 ARV value. The triplex rents for 950, 900, and 775.
Lesson 1, treat small multi family units like they are single family the looks matter more than the guts. We had to appeal the initial value and increased it from 145 to 190k, because the appraiser said it was fine to have the appraisal done in the middle of the re-roof. The 1st line of the reason for the low value was roofing in bad repair.
Lesson 2, work with your realtor to line favorable comps and provide them to the appraiser. Thank you@Michael Noto I can't recommend him enough if you are a serious investor in central Connecticut. Working with him I was able to quickly get more reasonable comparisons to my tri-plex than the ones used in the appraisal.
Lesson 3, Prepare a logical response. Which I am including in:
Good morning Mike,
I really appreciate working with Berkshire Bank on this to sort through what is a low appraisal. There are some key discrepancies in the report I would like to point out.
The first item on the report to discuss is the roof condition. When we started working on through the appraisal of the property we disclosed that we were fully re-roofing (strip and re-sheathing) the roof. We delayed the appraiser coming out to the property to reflect, this but due to the weather they came out during the middle of the re-roof not at the completion. I am attaching the signed contract and a picture of the completed re-roof. This was discussed with the appraiser, but apparently the on site person was only taking pictures, not completing the full appraisal.
The second item for your consideration is the comparables which were used- which were all from the July of 2015. I worked with my realtor: Michael Noto of Salcal Realty to pull more recent comparable properties. The first is 21 Lyons Street which was a short sale for $169,000 on a $185,000 bank appraised value. This house is in worse condition than 171 Bassett and in need of renovation. The second house is 88 Garden Street, which sold for $194,600. This house is very comparable condition wise with each unit having a separated laundry, and full refurbishment of the interior of the units. The third house is 95 Columbia, which sold for $199,000. The discrepancy with this house is that it currently has 1 electric heating unit, and 2 gas heat. We have 2 gas furnaces and 1 gas boiler- two of which are brand new in 2015. The fourth and final comparable is 191 Hart Street, which sold for $205,000. This house is the best side by side comparable to 171 Bassett. I have attached sales cards for each of these housing units to this email.
The last comment in the appraisal report I would like to bring to your attention is that the zoning is R2, but this is a functional tri-plex. All of the units which I have provided as comparables are all in identical zoning, where they have legal tri-plexes in an R2 zoning.
Thank you for considering this information, and I look forward to your response.
Thanks @William Collins. I appreciate how you've not only shared lessons learned but how you refuted the appraisal as well.
Thanks @William Collins !
Bill did a great job outlining his case to the bank as to why the appraisal should have been higher.
Also, the rehab that he did on this specific property was top notch and what did that lead to? He is getting quality rents for the area for each unit. Just a very good job done on all facets of this project.
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