Our newest BRRRR in Texas

15 Replies

We have a contract on rental #6. Cash out of pocket $15,000, Purchase price $89,000, rehab $23,000, ARV $135,000, capital gain $12,000, 80% return on capital gains, monthly cash flow $463, 37% cash on cash return, total return for year 1 without appreciation: 125%. We have or are looking to invest in DFW, dallas, Fort Worth, Texas, Houston, garland, mesquite, Rowlett, Katy, sugarland, haltom city, Denton, Waxahachie, Waco, Austin, San Antonio, round Rock, Gainesville, Justin, Arlington, Grand Prairie, Irving, farmers branch, rockwall, Corinth.

Hey Jeff, I can introduce you to my client who invest in the Houston area. He knows the market very well and he mentor a small group.

Jeff I’d love to connect. It has been a little while since I’ve been on bp and I do not see the connect option. Please connect with me. Thanks.

Jeff thanks for connecting. If in the Fort Worth area and interested in networking, if love to meet you for coffee. It’s always a good idea to network and build a good team. It looks like we have some similar goals and interests and could maybe help each other.

Originally posted by @Jeff Richardson :
We have a contract on rental #6. Cash out of pocket $15,000, Purchase price $89,000, rehab $23,000, ARV $135,000, capital gain $12,000, 80% return on capital gains, monthly cash flow $463, 37% cash on cash return, total return for year 1 without appreciation: 125%. We have or are looking to invest in DFW, dallas, Fort Worth, Texas, Houston, garland, mesquite, Rowlett, Katy, sugarland, haltom city, Denton, Waxahachie, Waco, Austin, San Antonio, round Rock, Gainesville, Justin, Arlington, Grand Prairie, Irving, farmers branch, rockwall, Corinth.

Jeff,

Congrats on the BRRRR! Can you breakdown how you get $463 in cash flow? Are you including property management, cap ex and vacancy? It just seems high for a typical property I'm familiar with in Houston. Thanks!

Congrats Jeff and keep up the good work!

@Cameron Tope We list the properties ourselves and typically get the tenant in place without incurring any costs, by setting up group showings. As far as Cap Ex, we replace everything that will go out in the next 7 years upfront and factor that into our rehab (We will sell within 7 years to trade up to apartment complexes when Cap rates are higher). As far as vacancy goes, we typically have the highest quality property in the area at the best price to get the largest tenant pool possible, we then screen them thoroughly and check with multiple personal references and we go back to 2 of their previous landlords for recommendations, to date we have not had any vacancies, not a single day except for the marketing time after the properties were rehabbed (typically 2 weeks). We have another property in Houston that our monthly payment is $603 PITI, and rent is $1,150, so the $463 is on the lower end.

Originally posted by @Jeff Richardson :

@Cameron Tope We list the properties ourselves and typically get the tenant in place without incurring any costs, by setting up group showings. As far as Cap Ex, we replace everything that will go out in the next 7 years upfront and factor that into our rehab (We will sell within 7 years to trade up to apartment complexes when Cap rates are higher). As far as vacancy goes, we typically have the highest quality property in the area at the best price to get the largest tenant pool possible, we then screen them thoroughly and check with multiple personal references and we go back to 2 of their previous landlords for recommendations, to date we have not had any vacancies, not a single day except for the marketing time after the properties were rehabbed (typically 2 weeks). We have another property in Houston that our monthly payment is $603 PITI, and rent is $1,150, so the $463 is on the lower end.

Jeff,  that's a solid answer! But I have to admit, in my experience even if we replace all the major items, we still have repairs or small expenses that can add up over the course of a year. Here are some examples of small issues we've had to address over the past few months; leaking sink, lint buildup in dryer vent, clogged garbage disposal, ants and cockroaches, and broken sprinkler head in irrigation system. 

Now these are small and relatively inexpensive issues spread out over several properties, but they add up, especially if you're not handy and need to hire out the work. 

My real fear comes from a newbie who reads your post and thinks $1350 gross rent minus $887 PITI equals $463 in his or her pocket every month.

You have a strategy that works for you, which is great. I just wanted to shed some light on the cash flow details. 

Best of luck on future deals and especially investing in the Houston market!

I'm sure there's a better place to ask this, but I follow the DFW forums and prefer to talk locally. Because I am a rehabber with a desire to learn more about the other side of the business, what is a BRRRR?

@Jason Coyle - BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. There is a ton of resources on this site pertaining to this topic alone. Here is a good introduction:

https://www.biggerpockets.com/renewsblog/brrrr-buy...

Also - off topic - A couple of weeks ago I checked out some of your projects on your website and I like the work you do. Way to be. :)

Originally posted by @Cory Dean :

@Jason Coyle - BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. There is a ton of resources on this site pertaining to this topic alone. Here is a good introduction:

https://www.biggerpockets.com/renewsblog/brrrr-buy...

Also - off topic - A couple of weeks ago I checked out some of your projects on your website and I like the work you do. Way to be. :)

Hey Cory, thank you for the info and the compliments. If you ever need anything, don't hesitate to reach out! 

@Jason Coyle There are multiple ways to finance a BRRRR, I prefer to use a 75%ARV hard money loan for purchase and repairs, then a couple of weeks into the rehab, and I'm sure it'll be done in the following 2 weeks, I start the Rate/term refinance into an 80% LTV conventional loan and try to get out of the hard money before I make a single payment. This is a way to keep as little cash in the deal as possible and keep buying.

@Jeff Richardson I just read this thread & am curious to know if there is a seasoning period of 6 months for conventional re-fi in Texas? Have you worked with any lender that is open to conventional financing sooner than the seasoning period?

I am curious how to avoid the 6 month seasoning period as well in Texas. I'm in the Corpus Christi area and starting to work numbers for my first deal.

I am curious how to avoid the 6 month seasoning period as well in Texas. I'm in the Corpus Christi area and starting to work numbers for my first deal.

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