Second BRRRR was a success! Already lined up next deal too!
Investment Info:
Small multi-family (2-4 units) buy & hold investment.
Purchase price: $122,500
Cash invested: $35,000
Second duplex purchase with intent of it being BRRRR #2. Purchased in May 2018. After non-renewal by tenants I was able to complete renovations in 3 months, and take total monthly rent from $1,275 to $1,950 and refi out all construction costs. Additionally increased value from $135k to $210k with ~$30k renovation budget. Have a 30 year fixed conventional note on this @ ~$900 in cashflow after all expenses.
What made you interested in investing in this type of deal?
Initially was interested in this deal because it was next door to my first investment, and I knew the condition of the property was below market comps. Since I'm an owner/manager of my properties it was attractive simply because of proximity to my first rental
I was familiar with the neighborhood and knew exactly what I would be able to increase rents too with a little bit of work. Additionally I knew my "fall back" could always be keeping it as is and still collecting fair cashflow on this.
How did you find this deal and how did you negotiate it?
Saw FSBO sign and contacted owner direct from previous interactions with him. Initial asking price was $165k which I offered over the phone with a walk through contingency. After first inspection of the property I was prepared to walk away, and told seller my best deal would be $122.5k. After a few days his attorney contacted me and asked how quickly we could close, and if we would assume the property as-is.
How did you finance this deal?
Conventional financing initially, with cash for rehab.
How did you add value to the deal?
Property improvements of ~$30k increased value from $135k to $210k appraisal in just under 1 year.
What was the outcome?
Increased rents from $1375 monthly to $1950 with full reimbursement of funds through conventional cash out refi.
Lessons learned? Challenges?
Double my timeline for renovation for sure. Always have an exit strategy, and concrete agreement in place with contractors. We saved a lot of money working with local "handymen" but as a result our lofty timelines were blown. In the end we are very happy with the results, and we got an awesome crash course in BRRRR in a short period of time.