Middle of a "live-in BRRRR" Richmond, Virginia

14 Replies

I'm currently in the middle of what I'm referring to as a "live-in BRRRR" in Richmond, VA. Similar to a live-in flip but instead of flipping after living here I intend to refinance after 6 months and hold as a rental instead of selling. This is my first real estate purchase! It was extremely challenging to make it happen and included my first offer being accepted then canceled halfway through the process due to unforeseen plumbing issues.

Details:

Left to do:

  • Determine ARV (150-200k depending on additional renovations)
  • Get a better handle on potential rents
  • Determine additional repair budget (15-35k) depending on ARV target and potential rents
  • Complete, at minimum, a utility room addition, bath and kitchen remodel and porch conversion

Big thanks to @Stephen Glover , @Shera Gregory, and Fixer Upper Coach Pete DeWorken and many others for their advice already in this process. They are all great!

First few things I tackled were the disgusting carpets, cleaning and painting all nicotine stained walls, and landscaping.

If anyone in the area wants to get together and chat, would love to meet more investors or future investors

Woo-hoo! I am currently in a live-in renovation on a duplex in Battery Park that will be a rental when complete. Did a 203k loan for repairs since its been untouched since it was built in 1928 and doing state and federal historic tax credits to offset the cost. Plus enough sweat equity that I might as well cancel my gym membership. Cheers! 

Awesome story Eddie! Goodluck on everything and please keep us updated on how things are turning out! I am looking to invest in a BRRRR as well and appreciate any advice!

 

I was having trouble posting photos on BP when I originally posted this, but here are some progress I've made. I started out getting the inside to be livable and then focusing on the landscaping and making it not look like a vacant property! Unfortunately, other than cleaning, spackling and painting inside, plus the landscaping, I'm starting to run into a wall of what I know how/am capable of doing. Trying to find some good contractors.

Here's a breakdown of costs for my 2nd phase of remodeling, in addition to costs and scope mentioned in the OP. All of this was handled by a general contractor as I began to get too busy and overwhelmed with having to coordinate myself. Basic scope: Interior/exterior paint (including some interior drywall fixes and exterior siding repair), remove two closets and turn it into a hallway down the middle of the house (see photos above), remodel kitchen including floors, paint and counters (reuse cabinets), take down the kitchen wall to create open concept, sand and refinish all hardwood and repair hardwood where the closets were removed, add in closets to all three bedrooms, and relocate multiple doors. Total cost $24,500. 

Lots of lessons learned. 1. Get multiple bids 2. Get line item bid prior to deposit 3. Don't do a live-in flip on a short timeline... 

Next steps - trying to do either a rate/term refi + HELOC or a cash out refi. Cash-out refi rates are coming in very high so may go with the the rate/term + HELOC to get on with the "repeat" part of the BRRRR!

Demo $1,835.44

Framing $893.41

Siding $2,027.03

Plumbing $1,148.65

Insulation $255.56

Drywall $2,702.70

Flooring $4,231.08

Tile $1,297.30

Cabinets $308.00

Trim carpentry $1,685.30

Countertops $716.25

Paint $6,391.89

Hardware $394.26

General construction costs $792.00

The BRRRR is OFFICIALLY ready to repeat! I closed on the refinance this morning. Here's a complete summary of the deal, including finances.

First, the overall impact on my personal finances from this deal: 

Total cash needed from close to close: $43,000

Cash to borrower (me!) at close of the refi: $53,000

Saved rent I would have paid: $4,000

Equity created: $38,000

Change in net worth: $52,000

Time from close to close: 8.5 months

Though it worked out really well, I probably wouldn't do it again. This deal was a huge pain and included me living for months in a literal construction zone, covering and uncovering my "furniture" (my bed and clothes on top by bed) whenever I left or returned to the house every day as well as cooking and eating all my meals at my work. It also involved a lot of me doing the rehab myself or being the GC for many of the subs.

Purchase price: $90,000

Holding costs: $7,300

Closing costs total for both transactions: $6,000

Rehab costs: $38,000

ARV appraisal: $190,000

The appraisal came in way higher than I expected, which really helped me pull all my cash out of the deal when I thought I was going to be leaving some in or just break even. So that's always icing on the cake!

LTV: 80%

New loan total: $152,000

Interest rate: 4%

Payment (PITI): $903/month

Rent: $1400

I don't think the deal will cashflow like crazy as a rental, but given the area it is in and my overall belief in the city's future growth, I decided to hang onto it rather than flip it. With a low-interest rate, though I won't cashflow much, I will be getting great debt paydown. So I'm sticking with it for the appreciation, debt paydown, and tax benefits. It was meant to mostly be a learning experience and I'm walking away with $10,000 in extra cash and $38,000 in equity so I'll deal with the limited cashflow at first. 

Now on to the next one!! I'm hoping to invest out of state and pay all cash for another BRRRR, use the funds and my other savings to put a downpayment on a large commercial property project, or use the cash as down payments with hard money to get multiple BRRRRs going at one time.

The lessons I learned along the way of doing a renovation style loan with a bank... (203k, Homestyle, etc). This was a Homestyle. 

It is a horribly painful process with all the paperwork, but definitely worth it as a way to get your first deal.

1. Go with homestyle - basically the same product but less paper work because there’s no 203k consultant. Unless you’re feeling like you really want that help and oversight, then it may be worth it

2. Use as few contractors as possible. The paperwork is enormous and the fewer contractors the less paperwork you’ll be chasing down. If you are the GC on a homestyle you’re limited to 3 sub-contractors. I would recommend just finding a GC who can do one set of paperwork and they can get as many subs as needed for the project

3. The fees are enormous compared to a regular loan. Just make sure you are budgeting in for extra closing costs. Mine were probably 6% instead of the usual 3%.

4. Understand that you’re probably going to pay more than you would for contractors if you weren’t using this program. The extra paperwork and licenses are going to remove a lot of the lower-priced contractors from the picture

These are all lessons learned. I tried to scrap together a deal so that I would have the most equity as possible at the end. I used 3 contractors, I had to babysit them constantly for paperwork and scheduling. I also couldn’t get all the work into the loan because I could only use 3, so I ended up having to come out of pocket, later on, to finish things up. In the end, I got a great deal and built a ton of equity but if I could go back even if it meant paying an extra 10k in rehab costs I would have just found a competent GC to deal with everything. If you want to learn the GC life do it on your next deal where there’s not so much paperwork and red tape.

are you actually getting 1400?  Great neighborhood, but that's (700/br) way above what I'd expect in rent there.  I own a couple of places within a few blocks of there though, and am curious if I'm underpricing.

Long term price appreciation potential is huge though

@Charles Frankenhoff

Hi Charles,

There are 3bd and 1ba!

Appreciation has been great and there are 6 flips within .25 miles so I’m excited to see how those go and if they bring up values again.

Right now I rent two of the rooms and collect around $850 in rent plus utilities, I live in one bedroom.

I think both of these tenants are getting a steal right now and I had a lot of interest when I posted it.

There’s a very similar property at 5208 Rockland that is trying to rent around $1400 and it hasn’t yet gone off the market so maybe $1400 is a stretch a bit right now?

Not sure, my place is almost brand new and I think once Veil is finished rents will go up.

Worst case I think I could rent by the room for at least $1300.

Where are your properties? Are they in this street cluster? Things do change quick if you go south or east of me pretty fast for the worse.

Eddie

1400 is more than I'd expect there yet...  I rent nice places like yours for around 1200.  But was planning on moving them to 1250, previous to this.  East of you is good actually, (Forest View, Forest Hill Terrace), south of Midlothian less good, but better than you'd think.  I've got 3 around you, 2 across midlo in that area.  

The long term appreciation in that area will be excellent, assuming Covid doesn't kill things.  I would have bought anything brick that came on the market there previous.

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