First Potential BRRRR Deal

8 Replies | Kansas City, Missouri

I currently have two buy and hold properties with 5 units in total (1 SFR and 1 4plex). This is my first traditional BRRRR property. I would be curious to get fellow investor thoughts on this potential deal I plan to make an offer on today.

Purchase Details

Location - Kansas City, MO

Purchase Price - $67,000

Estimated Rehab - $25,000-30,000

Estimated ARV - $135,000 (as high as $145,000)

Estimated Holding Costs (includes hard money loan interest, property taxes, utilities, appraisal, inspection) - $7k

Total Out of Pocket - $20,400 (includes 20% down on purchase price and holding costs)

Hard money loan covers 80% of purchase cost and 100% of rehab costs.

Refinance Details:

LTV - 75%

Loan - $101,250 (this will leave us with $0-6,000 of our own money invested in deal including refinance costs)

Estimated Equity in Property - $28,000-33,000

Market Rent - $1,200

Estimated Monthly Cashflow - $200-225/month

Cash on Cash Return - 40% to infinite

Updated over 2 years ago

Update: We had our offer accepted at $67k. We are full steam ahead on this deal.

Updated over 2 years ago

This is a single-family residence.

@Kyle Wells The numbers on this look good overall. My first question would be is this a SFH or MF? The reason for the question is what is cost per door. We try to get a minimum of $100 per door leaving no money in the deal and if this is a duplex or a SFH, the numbers look good.

The biggest points of failure when doing a BRRRR occur on the ARV and Rehab costs. If you are really solid in those numbers, the only other item to keep in mind is the re-finance generally cannot happen until 6 months after purchase. There are some lenders who can avoid the seasoning requirements, though make sure you find this out from your re-financing lender.

I am also an investor in the KC area, so feel free to reach out if you need any contacts for hard money lenders or re-financing lenders. Good luck!

Originally posted by @Beth Turner :

@Kyle Wells The numbers on this look good overall. My first question would be is this a SFH or MF? The reason for the question is what is cost per door. We try to get a minimum of $100 per door leaving no money in the deal and if this is a duplex or a SFH, the numbers look good.

The biggest points of failure when doing a BRRRR occur on the ARV and Rehab costs. If you are really solid in those numbers, the only other item to keep in mind is the re-finance generally cannot happen until 6 months after purchase. There are some lenders who can avoid the seasoning requirements, though make sure you find this out from your re-financing lender.

I am also an investor in the KC area, so feel free to reach out if you need any contacts for hard money lenders or re-financing lenders. Good luck!

Thanks Beth. This is a single family residence. We had our contractor and PM walk the property and they think total rehab will be at $25k and I'm budgeting an additional $5k just in case there are cost overruns. The comps we used were similar sales within a few miles within the last 6 months, we believe $135k is on the lower end of the comps we are seeing in the area. I appreciate the feedback! Would love to talk to you about your experience investing in Kansas City.

Originally posted by @Dan Torluemke :

Looks like a no-brainer to me. Congrats! Curious how you sourced this deal, I’m looking to do similar. 

Thanks Dan! I actually found this one on the MLS. I have been scouring it for potential deals over the last 1-2 months and saw a lot of potential in this one. The pictures left little to be desired, but the property was actually in better shape than expected as the seller had begun the rehab project and ended up prioritizing several other projects over this one.

@Kyle Wells

Sweet deal! How come you’re putting so much down? Just. Utopia. My experience has been that if you have money in the deal you shouldn’t need 20% with a hard money lender. It’s nice to have some of that $20k sitting in your bank account for the overages or to ensure your payments can stay on track when you are getting draws.

Just a random question, seems like a great deal.

Also make sure to walk through the house and get a detailed scope with your realtor and not just your contractor. Sometimes going through that process with only 1 contractor can be tough for your expectations later. You may have already done that, but do t only rely on a contractor telling you what you should do. And if it’s rental, no need to over rehab.

Happy deal making! Put in that offer :)

Hi Tanya, the hard money lenders that I have been in contact with (2 total) have required either 20% of the purchase price down or 15% of total cost (purchase price + reno). We decided to go with the hard money lender that requires only 20% of the purchase price down. Perhaps as we have more experience, they will become less strict with these rules. Right now we only have two buy and hold deals under our belts, but planning to scale up big time over the next 5 years.

Thanks for the rehab tip. Our realtor (who is also our PM) actually walked the property with their recommended contractor and that is the anticipated budget they came up with given the scope to make this a rental. A part of the rehab is finishing the basement, which will allow us to turn this from a 2 bed/1 bath to a 3 bed/2.5 bath. After speaking with the contractor, our PM is confident the rehab budget will stay at or under $25k. Definitely not planning to do high end finishes. 

On another note, our offer was accepted yesterday, so we are full steam ahead on this deal.

Originally posted by @Tanya Rooney :

@Kyle Wells

Sweet deal! How come you’re putting so much down? Just. Utopia. My experience has been that if you have money in the deal you shouldn’t need 20% with a hard money lender. It’s nice to have some of that $20k sitting in your bank account for the overages or to ensure your payments can stay on track when you are getting draws.

Just a random question, seems like a great deal.

Also make sure to walk through the house and get a detailed scope with your realtor and not just your contractor. Sometimes going through that process with only 1 contractor can be tough for your expectations later. You may have already done that, but do t only rely on a contractor telling you what you should do. And if it’s rental, no need to over rehab.

Happy deal making! Put in that offer :)

Excellent! Congrats on the accepted offer! 

Be sure to reach out to Beth Turner since she offered. She is doing a lot of things in your market and may have more hard money people to try out for future deals :)