Long distance BRRRR inside IRA
Investment Info:
Single-family residence buy & hold investment in Alamogordo.
Purchase price: $97,000
Cash invested: $25,000
Foreclosed home sat empty for over a year. Still in the process of updating and preparing for rental. Did not know about BRRRR before purchasing, so purchased inside IRA with non-recourse loan, and then started rehab. Will be doing BRRRR in correct order on next property. Will add more photos as we progress.
Update April 2020--finished the rehab inside and out. Took much longer than expected. Made the mistake of hiring a handyman that was good, but primary job kept pulling him away and he wouldn't return calls or messages. Plus he kept the keys to himself OR LEFT THEM UNDER A ROCK BY THE DOOR FOR HIS WORKERS! Wow! I am pretty happy with the end results, but the process has been a learning experience. Also have renters lined up that are military (basically guaranteed rent for 2 year contract) but all military are put on hold from relocating due to Corona Virus. Hope they will be able to move now in May, which will be a full year since I took possession. Not the best turn-around. But 10 years from now when I am 65 and retired, and this is paid off, I won't mind. Also refinanced inside my IRA and was able to recoup most of my rehab expenses. New furnace and AC so should not have major expenses for long time.
Update: Renters finalized and moved in June. Rent $1150/month...$150 more than I hoped for and on a 2 year lease!
What made you interested in investing in this type of deal?
Wanted a property I could rehab and increase the value when refinancing.
How did you find this deal and how did you negotiate it?
Found the deal on Zillow
How did you finance this deal?
Inside my IRA I originally purchased with non-recourse loan, needing 50% down payment. It was a VA foreclosure, and they would only come down slightly in price. After the house was rehabbed I was able to refinance with a different bank and they did 60% financing on the non-recourse loan. Able to recoup some of my rehab and holding costs, since it took almost a year to get it rehabbed and rented.
How did you add value to the deal?
The home was listed as 2 br/2bath....but was originally a 3 br/2bath. The third bedroom had been partitioned to create large master closet and a small office. During rehab we turned it back into 3/2. Also updated the look inside with LVT flooring and paint, added granite counters, painted cabinetry and trim, replaced non-functioning AC, landscaped backyard full of weeds into desert style landscape, painted exterior brick to updated colors.
What was the outcome?
First renters loved it and signed 2 year lease for more than I had hoped.
Lessons learned? Challenges?
Need to find reliable contractor that will do work in timely manner.
Better estimate at repairs needed.
VA does not negotiate much on price....so avoid.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Rachel Connelly of Coldwell Banker in Alamogordo NM
