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BRRRR - Buy, Rehab, Rent, Refinance, Repeat

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Evan P Stegman
  • Real Estate Agent
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First property BRRRR

Evan P Stegman
  • Real Estate Agent
Posted May 9 2022, 13:07

Hello Everyone,

In October of 2021 I bought my first triplex aiming towards doing the BRRRR Method. It was a Triplex that cost $317,000 in Cincinnati, Ohio more specifically the EastWalnut Hills area. When I purchased the property two of the units were already rented out and one was vacant, those rents equalled $1950/month. Over the next couple months I did a complete renovation of that first Unit myself adding some sweat equity to the house, as well as adding a whole New HVAC System and central air(which previously didn't exist). When I finished the renovation I acquired a killer tenant for the new unit who now pays $1500/month making my total NOI $3,450/ Month. I still Live at Home with my parents and was looking to move into this property when the 2nd unit's lease is up in June. Then when I move in I can renovate this unit while I live in It. The third unit is a single where the tenant pays $750/ month. She has rented this unit for over ten years and is month to month. After I'm done renovating the second unit my plan was to refinance and buy another multifamily property.

Questions:

With High/rising interest rates does it make sense to still refinance since it will allow me to get into another property or is there another alternative I could do?  My current interest rate is %3.75.

If thats the case, what renovations would I be able to do to the long term tenants unit without kicking her out to add more equity to the property?

If you have any other advice I'd love to hear it, Thanks!

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Andrew Postell
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#1 Creative Real Estate Financing Contributor
  • Lender
  • Fort Worth, TX
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Andrew Postell
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#1 Creative Real Estate Financing Contributor
  • Lender
  • Fort Worth, TX
Replied May 9 2022, 19:09

@Evan P Stegman when you got started, what were you thinking the benefit of refinancing would be initially?

And the renovations that you should be analyzing should be based on the comps in the area.  You should OVER improve your property and you also shouldn't UNDER improve it either.  Examine the comps and that will tell you what improvements to make and what value you should expect.  Hope that makes sense.

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Joseph Cornwell#1 Real Estate Success Stories Contributor
  • Real Estate Agent
  • Cincinnati, OH
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Joseph Cornwell#1 Real Estate Success Stories Contributor
  • Real Estate Agent
  • Cincinnati, OH
Replied May 11 2022, 10:38

@Evan P Stegman

I have been doing BRRRR deals in Cincinnati for the last 6 years. For me, it just comes down to the math, will you get a better ROI on that capital if you refinance it out? Will you grow your cash flow by buying another property sooner? You can still get decent rates with 10/1 ARM, and hopefully rates come back down at some point and you could refi out of the adjustable rate. Shop the rates, do the math on the current property and other deals you could move that extra cash into. See what option is best and make the decision at that point. As for the second question, I typically move existing tenants up to market rates slowly overtime instead of kicking anyone out. If they are a good tenant who pays on time, I let them stay and just tell them, hey you are X amount under market, I am going to increase it over the next 3 years until you get there. If they choose to move then I will go ahead and renovate the unit and raise the rent up to the new market rate. If they are a problem tenant, then I may move them out when possible to renovate that unit first. If you have any other questions, I am happy to jump on a call. Best of luck!

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