1st investment and BRRRR attempt

18 Replies

New investor here from Jacksonville, FL. In early 2018 I got the real estate bug and spent most of the year reading and listening to podcasts. 

My wife and I decided that long term buy and hold investments were right for us and BRRRR was the strategy we wanted to to use.

After analyzing many properties over the past year, we finally got a property under contract and closed on it on December 31st! We used a HELOC from our primary residence to fund the $45k purchase price.

The house is a 3/1 with 884 sq ft. It had a new roof and AC about 5 years ago, but aside from that it needed a full kitchen, bathroom, plumbing, exterior repair, paint, floor refinishing, and windows. 

We budgeted $20k (also paid for with our HELOC) in renovations, met with a few different contractors, and picked the one we felt best with based on his scope of work, price, and references. They got started the first week of January and plan to be done by the second week of February.

As I write this, things are progressing well on the renovation and we still seem to be on track and on budget. I think we have two weeks left in the project and then we’ll be able to market it and start vetting potential tenants. 

In the middle of the year (after 6 month seasoning period) we plan to cash out refinance the deal. Our target ARV is $90-95k so, ideally should leave us with zero of our money left in the deal (except maybe some of the financing costs). Our target rent is $925/month.

I’ll post a few more updates once the renovations are done, when we place a tenant, and then again once we refinance. It’s an exciting journey that we are happy to have officially started. Once we get the money back, we plan on putting it back to use in another property as soon as we can. 

A huge thank you to the BP community. We have learned so much over the last year, and owe much of that to Bigger Pockets. 

Kyle

@Kyle Jensen

Hey Kyle,

How did you find the property ? Off-market or MLS?

This was a deal I found on MLS. It had a prior contract fall through due to the needed repairs and we started negotiations with them after a large price reduction. The ability to close quickly and with cash helped us to negotiate the price down to what we wanted.

@Kyle Jensen that’s awesome! Congrats! I hope it all works out for you.

If you don’t mind me asking where is this home located?   Also how do you like your contractor thus far?  Would love some contact info if he is good and you don’t mind sharing.  I feel you can never know enough contractors haha.

Congratulations on your first BRRRR! I hope you have many successful investments!

@Kyle Jensen

Congrats on your first BRRRR. I like it distressed property at a healthy discount. ROI will be infinite after 6 months. That is how I operate also. I've completed almost 20 of them. It's a great strategy.

Good Luck and keep going.

Looks great Kyle! Keep us posted on the rehab and your future deals. Good luck!!

Thanks guys!

@Simon Collins

It’s in Lakeshore. Once we wrap up the project I’ll definitley let you know what I think about the contractor and if I’d recommend him. 

We finished up renovations last week! It ended up being about a 2 month project, which was 2 weeks longer than what was planned, but all in all, I’m happy with how it turned out. Check out a few of the “after” pictures below!

 

Now we are listing it for rent this week and will be working through tenant screening. 

Oops.. my pictures didn't come through on the last post. Let's try that again! 

@Kyle Jensen great transformation!

One question now that it's over... do you think you over renovated?

Dont take this as criticism because it looks great, and it's a very common thing, but I think you overspent by quite a bit by renovating as a flip, but using it as a rental. I did the same thing on my first BRRRR and looking back, could have saved a good bit of money by renovating for a rental.

I could be wrong and dont know the Jacksonville market, but do $900 rentals in that area have granite counters and tile showers? That's a pretty low end rental in my market and would rent quickly with laminate and a prefab shower insert.

Overall, great job, Just food for thought...

@Jason D. I appreciate the feedback and that is certainly something I have thought about. We have learned some lessons on this first deal and we have plenty more to learn as we move through the tenant screening/landlording process as well as the cash out refinance. My reasoning behind the slightly nicer finishes was to help drive the appraisal to a number that would work for us.  For example, the granite cost $900 and I thought that the durability and the “wow factor” was worth spending a little more over something like laminate.  Depending on how the rest of this process goes though, I will certainly evaluate other levels of finishes on our next deal. 

The good news is that I was conservative on the rent estimate at the beginning and it looks like we should be able to get $1000/mo now as well. 

Congratulations @Kyle Jensen

I have completed several BRRRRs  in Lakeshore and have got $950 for 2/1s and over $1000 For 3/1s. Lakeshore has made a turn around and with the close proximity to the arts district more and more people seek out rentals in the area due to cost effectiveness. Thanks for adding value to the neighborhood! 

@Kyle Jensen awesome, thank for sharing. It's very inspiring. Did your contractor stay in budget? I too am interested in finding reliable contractor. Please Keep us posted on how things are going with tenant selction and refi. 

Originally posted by @Kyle Jensen :

@Jason D. I appreciate the feedback and that is certainly something I have thought about. We have learned some lessons on this first deal and we have plenty more to learn as we move through the tenant screening/landlording process as well as the cash out refinance. My reasoning behind the slightly nicer finishes was to help drive the appraisal to a number that would work for us.  For example, the granite cost $900 and I thought that the durability and the “wow factor” was worth spending a little more over something like laminate.  Depending on how the rest of this process goes though, I will certainly evaluate other levels of finishes on our next deal. 

The good news is that I was conservative on the rent estimate at the beginning and it looks like we should be able to get $1000/mo now as well. 

Definitely a balancing act between not over renovating and making sure you hit your target ARV. An extra $50/mo. is great!

Originally posted by @Kyle Jensen :

After analyzing many properties over the past year, we finally got a property under contract and closed on it on December 31st! We used a HELOC from our primary residence to fund the $45k purchase price.

Great job, Kyle! Inspiring story.

I had a question about your HELOC terms. Mind if I ask how much equity you had in your primary residence? What was the process like getting it that done?

@Kyle Jensen great job! My wife and I have a couple properties in Jacksonville near there near Normandy and the Herlong Airport. Awesome for the neighborhood!

@Kyle Jensen Great job on the renovation! We should create a list of renovation projects here in Jax and vote on the best, I think yours would be in the top 5! 

This is not the ideal market to rent in, I know some people think so, but this home is the perfect starter home in Jax. They are flying off the shelves in 2-3 months on the MLS, sometimes less. Think about flipping now, there will be time to buy properties on the cheap when the recession comes in 2020/21, as is being forecast now. Its a great time for buy fix and flip in Jax.

Great job! 

@Anthony Trollope We were able to pull out $75k in a HELOC and it was a very easy process. I didn’t really shop around, but I’m sure if you did you could find the best deal/terms. I opted for ease and went with our current bank and the company who already held out mortgage. 

@Jack Bobeck We have certainly contimplated flipping it, but our goal is long term cash flow and it’s hard to argue with a “free” property if we can get all of our money back when refinancing. At this point we are going to hold onto it. I hope I don’t look back at your post in a few years and kick myself though! 

@Sidney Qiu The contractor did stay on budget (well, almost), but I’ll send you a separate message about him. 

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