Second BRRRR! 23.99% CoC ROI with minimal rehab...

10 Replies

Investment Info:

Single-family residence buy & hold investment in Indianapolis.

Purchase price: $43,000
Cash invested: $7,084

Small 3 bed 1 bath rental property. Four walls and a roof. Nothing special.

What made you interested in investing in this type of deal?

This arrived in my e-mail from a wholesaler as essentially a "turn-key" opportunity that was rent ready. That was the biggest interest I had in the property. The area is pretty good rental area as well.

How did you find this deal and how did you negotiate it?

Wholesaler e-mail blast. No negotiation.

How did you finance this deal?

I had a private lender that was willing to do 10% for up to 12 months with 1 point. Relatively attractive "cash deal" financing.

How did you add value to the deal?

We put about $6000 working to get it rent ready. Had to move a furnace due to code issues. A few HVAC repairs.

What was the outcome?

It rented out very quickly with pretty stable tenants.

Lessons learned? Challenges?

"Rent Ready" or "Turnkey" wholesale deals are rarely that. Always get an inspection prior to purchase. 80% LTV on a cash-out helps the cash-on-cash ROI!!!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

This was my first BRRRR with a local credit union that does commercial portolio cash-out refis with zero seasoning 80% LTV . However ... we ran into title issues that drug the whole thing out to 8 months. VERY glad to get it cashed out!

Nice job. I'm having trouble finding loans or cash outs for under $50K.  How long did it take to find "a local credit union that does commercial portfolio cash-out refis with zero seasoning 80% LTV"?


@Gregg Benningfield :     Don't dispair!    They do exist and they are out there.    They are just very few.   Like a white tiger in the wild.     Here is my advice to you:

Whatever market that you are in - do a Google search to find everything single bank, credit union, lending instituion you can.   Make a spreadsheet to document their name, contact info, location, restrictions, and terms of non-owner occupied purchases and cash-out refis.       I did this in the Indianapolis area and out of 40 different lending institutions only 5 met my criteria (see below).     And out of those 5 I ended up only being able to work with 2 of them.    


The white tiger you are looking for:

80% LTV on a cash-out refi. This is the most rare. Typically commerical loans. Typical 5 year ARMs with <25 year amortizations which can increase the monthly payment and decrease cashflow. So run your numbers!

Zero seasoning.   This is a big one.   Depending on how you aquired these properties ... you could be eaten alive in holding costs before you are able to get it refi'd into a stable long-term debt service.

No limit on number of loans.    Not as big of a deal ... because you could play some tricks to rotate refis with you and your wife as an example.    But it sure is nice to get a smooth refi process and not worry about hitting a limit and having to start all over with a new strategy.


Best of luck!!!


Paul

@ Paul Beets : Thanks for the quick response. Have 2 paid cash for and closing with BofA 11/1 on first financed rental. It is extremely time consuming and a PITA for a $31.5K loan and giving 20% of that down. I could walk into the dealership and buy a $60K car in 30 minutes! I will start on that list this afternoon if I can get out of the bank early enough.

Thanks again.

Gregg.

@Gregg Benningfield :    Extremely time consuming is an understatement.   This is the reason I've been looking for a lender who is a pleasure to work with and can turn these loans quickly.    The lender I worked with on this particular deal sent all the information over to title and then went on silent running for 1.5 months while we waited for the appraisal.   Once the appraisal arrived the discovered that title never received the information and we had to start again with title.    What should have been 5 month cash-out turned into an 8 month cash-out.   Lucky my holding costs were low because I financed the purchase with a private lender 1 point + 10% interest only.   Whew ...

I think I might have found a much better option.   They are willing to run title and do an estimated appraisal based on the rehab punch list and budget all before the rehab is complete.    Then once complete all they have to do is run the appraiser out again and confirm the work that was supposed to be done actually got done and we can close quick.    

Keep an eye out and I'll be posting another one with the results!  

Thanks,

Paul

That sounds ideal (talk about the white tiger!). Can't wait to hear all about it. Sounds like it might be easier to find hard money lender than a bank with those terms. Think your method is the best of all worlds in terms of not having to use all of your free cash on hand.  We never stop learning.

Gregg.

Congrats on your first BRRRR @Paul Beets . Great to hear that a newbie can pull it off in Indy. Are you saying the RiFi was supposed to take 5 month but then took 8 month? Either way would be a very long time to get a loan of that amount. I think getting a loan should not take more than a month if it goes smooth.

@Simon Stahl :    Yes for sure.    It started out when I purchased this property the only lender I had required 6 months of seasoning.    So I was already waiting for the 6 months to be up before I applied.     Meanwhile I began researching lending institutions and ended up finding one that had zero seasoning and began the refi process immediately (hence the 5 months).

Unfortunately ... lender wasn't on their 'A' game and messed up the communication with title company and caused the whole process to stretch out to 8 months.

If I had to do it over again same property and everything with the new lender I'm working with ... likely could have cashed out within 2 or 3 months.   Maybe earlier.    It wasn't much rehab and it rented very quickly.

Live and learn!

Paul

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