My first BRRRR

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My first BRRRR

William R.
Investor · Louisville, KY · Member since 2013 · 139 posts · 43 votes

I close on Monday for my second BRRRR property. My fist was a 3 unit building, so a bit different, this one should be easy. I am a buy and hold investor, so lots of people ask why I don't flip it. I am investing for the long term and enjoy being a landlord who provides nice properties at a fair price. Every time I look at my Mint account I am amazed at what real estate has done for me! This property was a Fannie Mae foreclosure in a "C" neighborhood in Louisville Kentucky. My goal is to refinance, get all of my initial investment back and cash flow $300+/month. The purchase price is $25K and I expect to put $14K into it. Comps in the neighborhood are around $60K.

Fist thing I'll be doing is treating for termites with Termidor SC while the electric gets reconnected. Then, HVAC, Paint, floors and fixtures. I hope to have it rented in under 3 months. My issue is going to be in not over improving it (I probably did that with the last one).

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Todd Bauer
Prospect, KY · Member since 2016 · 5 posts · 4 votes
10y

William Be sure to stop by my store in Louisville,  Builders Surplus  5600 Poplar Level Rd.  Get signed up for Pro Rewards (You qualify cuz you flip/own investment props)  I think we can help you NOT over spend on improvements.  But remember if you rent you might invest in High Use High Abuse materials so you aren't constantly replacing every re-rent.  Best of Luck  

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  • Brett WeaverPro Member
    Rental Property Investor · Loretto, TN · Member since 2016 · 44 posts · 27 votes
    10y

    Kudos William! I'm looking at something similar to that in my own neighborhood.  I have a contractor meeting me there this evening.  We struggle with over-improving also, so I can relate.  This would be our third property.  Keep us updated and good luck!

    1Reply
  • Mike Fiorese
    Investor · Fairfax, VA · Member since 2014 · 34 posts · 11 votes
    10y

    @William R. would you mind sharing the details of your first BRRRR refi? I have two BRRRR deals coming up on the 6 month title seasoning and am interested to see what other investors are doing at that point. Conventional loan?

    1Reply
  • William R.
    OP
    Investor · Louisville, KY · Member since 2013 · 139 posts · 43 votes
    10y

    I was all cash into the property with a loan from the BOM (Bank of Mom). I applied for a mortgage through a broker shortly after getting it fully rented. I got a conventional loan at 80% LTV. They were very conservative with the loan and the appraisal. The appraisal had the rents incorrect, so when it was corrected the lowered the sq ft price to keep their appraisal the same. I tried to figure out what they would use as comps, but every property they used was in a different neighborhood, so impossible. I think they had a number in mind before they started... But, It worked out for me!

    0Reply
  • William R.
    OP
    Investor · Louisville, KY · Member since 2013 · 139 posts · 43 votes
    10y

    Good luck to you, Brett! Thanks

    0Reply
  • Khaled Helmi
    Flipper/Rehabber · Clarksville, MD · Member since 2014 · 85 posts · 66 votes
    10y

    Your rehab is 14k for all of that stuff - sounds a bit low.  Is that normal for a sc rehab? Or you doing the work yourself?

    Great stuff though - congrats!

    0Reply
  • Raven Parmer
    Architect · Louisville, KY · Member since 2014 · 94 posts · 47 votes
    10y
    Congrats on your second deal. That's exciting! I hope to start BRRRing once we get settled in our new live-in flip. Sounds like you're like me- tempted to over improve. Good luck!
    0Reply
  • Greg Hammond
    Investor · Louisville, KY · Member since 2015 · 36 posts · 8 votes
    10y

    @William R. Great stuff! I'm looking to do the same thing once I finish the property I'm currently working on. Here's hoping we get the snowball effect! My goal is to pick up at least one property a year while I'm still working full time and then hopefully I won't have to "work" full time, I can live my dream of fixing and holding houses. Good luck to you!

    0Reply
  • Todd Bauer
    Prospect, KY · Member since 2016 · 5 posts · 4 votes
    10y

    William Be sure to stop by my store in Louisville,  Builders Surplus  5600 Poplar Level Rd.  Get signed up for Pro Rewards (You qualify cuz you flip/own investment props)  I think we can help you NOT over spend on improvements.  But remember if you rent you might invest in High Use High Abuse materials so you aren't constantly replacing every re-rent.  Best of Luck  

    3Reply
  • Kevin Nalley
    Investor · Louisville, KY · Member since 2010 · 55 posts · 42 votes
    10y

    Great job, just be sure to screen those tenants well....  a bad tenant can cost you a year or more of profits.

    1Reply
  • William R.
    OP
    Investor · Louisville, KY · Member since 2013 · 139 posts · 43 votes
    10y

    Closed on Monday afternoon, so took the day off to remove the carpet.  Smells better already!!

    Two layers of carpet with one glued solid to the floor.  The good part is there is hardwood underneath. I plan to refinish them and save a few bucks because I budgeted for vinyl plank flooring that I was going to install myself.  I haven't decided if I am going to try to refinish the floor myself or not..

    The bathroom floor is particleboard and rotted out, so Ill replace the subfloor myself and plan on it taking two days.

    I am currently getting firm roofing quotes from 3 contractors that I have used in the past.

    I am ordering windows tomorrow and plan to install them myself when they get in.

    Ill try to update with pictures and details as I progress!

    2Reply
  • William R.
    OP
    Investor · Louisville, KY · Member since 2013 · 139 posts · 43 votes
    10y

    Particle board on the bathroom floor is never a good idea.  I am waiting on the electrical inspector to get the meter installed so I can have some electricity.  Its already been inspected by an electrician since it has been off for over a year.  This floor would be much easier to take up with a circular saw.  There was no toilet flange, so no firm seal to the pipe... 

    This place makes me not very fond of flippers.  This wall is 3" out of square and build with 4x4 pressure treated posts, so its going to be fun to try to make a new door look square. the previous door was hung on the 2x4 next to the door jamb. And, they put joint compound over 1/4 plywood instead of drywalling it, just weird.

    It's been a good first week. I took a few days off from my real J.O.B. Got the termite treatment done with some help, carpets removed, bathroom demoed, measured for windows and doors, working on putting a complete bid package together for Home Depot (If you spend more than $1500, you can request them to give you a bid price which is usually a bit cheaper). The electrician is tired of hearing from me about getting the power back on. I actually thought about flipping the house today. Is there a calculator to figure out if its better to BRRRR or Flip?

    1Reply
  • Account Closed
    Denver, CO · Member since 2016 · 1 post · 1 vote
    10y
    Thanks for posting this William R. It's a good read. May I suggest covering your floors if you're gonna keep it as a rental. If you flip, then definitely refinish them. Floor life is a function of how many times they've been sanded. Tenants will not usually be as gentle as an owner. Even if you can recover refinishing costs from a tenant's deposits you're shortening the life of the floor, which is expensive to replace. If you put carpet or some other flooring down they'll be preserved until you do decide to sell. Then you can refinish, and they'll look great.
    1Reply
  • William R.
    OP
    Investor · Louisville, KY · Member since 2013 · 139 posts · 43 votes
    10y

    Thanks for the sugestion @Account Closed.  My other rentals have hardwood, and I really like the ease of cleaning them and the time saved when turning apartments.  And honestly, in the short run its going to be much cheaper to refinish them than to cover them up.  Removing the last section of peal and stick tile I did find a few patches that I am going to have to deal with.  If I do cover them, I think I'd use a vinyl plank thats waterproof and its about $2/sq ft.  We'll see, lots of things to do before I have to worry about the floors.  at the moment I am thinking I will refinish some and lay some vinyl. 

    1Reply
  • David D'Errico
    Rental Property Investor · Louisville, KY · Member since 2015 · 221 posts · 106 votes
    10y

    So how is this property doing now? Did you meet your goals? How long did it take to do the rehab? How much did you spend? What does it rent for? Who did use to do the refi and how was that process? Were you able to pull cash out or just cover the cost of what you had into it? 

    0Reply
  • David D'Errico
    Rental Property Investor · Louisville, KY · Member since 2015 · 221 posts · 106 votes
    10y
    Originally posted by @William R.:

    I was all cash into the property with a loan from the BOM (Bank of Mom). I applied for a mortgage through a broker shortly after getting it fully rented. I got a conventional loan at 80% LTV. They were very conservative with the loan and the appraisal. The appraisal had the rents incorrect, so when it was corrected the lowered the sq ft price to keep their appraisal the same. I tried to figure out what they would use as comps, but every property they used was in a different neighborhood, so impossible. I think they had a number in mind before they started... But, It worked out for me!

    I mistook this to mean that you had already refi'ed this property? Are you still working on the Fannie Mae one?  

    0Reply
  • Dan Close
    Rental Property Investor · Louisville, KY · Member since 2012 · 51 posts · 31 votes
    9y

    Hi @William R.Thanks for sharing the details on your purchase I would be curious as well to see how the project went now that we are couple months out? Also good tip on buying over 1500 at home depot, I was not aware they discount past that threshold. 

    0Reply
  • William R.
    OP
    Investor · Louisville, KY · Member since 2013 · 139 posts · 43 votes
    9y
    Dan Close it turned out alright. It took longer that anticipated, but on the positive side I was able to cash flow the repairs and build up my reserves. I will hold this property free and clear unless I use it as leverage to buy another multifamily. I am all in this deal at $38K and it rented for $930/month a few days after listing. Granted I did everything myself except the HVAC and roof, so I earned the equity in this one. Now I'm looking for another deal.
    3Reply
  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    9y

    Did you get all of your $38k back out on the refinance?

    0Reply
  • William R.
    OP
    Investor · Louisville, KY · Member since 2013 · 139 posts · 43 votes
    9y
    Brian G. I did not refinance it, it's still an all cash deal. I believe I could finance it for more than I have in it, but would rather have the greater cash flow for the time being and I'v built up enough reserves to do another similar deal. I am considering using this property and some additional equity as leverage to buy a larger multifamily, but haven't yet found a property that I'm interested in. My goal is not to have a ton of properties, but to have cash flow to exceed my expenses and leverage reduces cash flow.
    1Reply
  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    9y

    @William R. Sounds like a well thought out plan. Keep grinding!

    0Reply
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