Investor · Oklahoma City, OK · Member since 2020 · 17 posts · 11 votes
Hello!
I am currently reading David Greene's BRRRR book and am hooked on the idea of BRRRR. I am in the Oklahoma City market and don't know anyone who has done a BRRRR deal. With that being said I would love to hear some stories of folks in the community that have experience with BRRRR:
1. How did you find your BRRRR Deal?
2. What were the initial numbers and did they pan out like you were expecting? Share the specifics if you have them please!
3. What would you do different on your first BRRRR if you could go back?
I have found many BRRRR deals from on the MLS, off market and direct from small banks (ROE). The last five I have done were REO's. The great part is no competition with the banks.
Here are specifics of a deal I did.
Purchase 85K
Rehab 15K
ARV 130K
Cash Flow $400
I had $5000 left in the deal. Got my money back in the first year.
I have found many BRRRR deals from on the MLS, off market and direct from small banks (ROE). The last five I have done were REO's. The great part is no competition with the banks.
Here are specifics of a deal I did.
Purchase 85K
Rehab 15K
ARV 130K
Cash Flow $400
I had $5000 left in the deal. Got my money back in the first year.
Rental Property Investor · Salem, VA · Member since 2017 · 113 posts · 39 votes
6y
@Blake Billings Found several BRRRR deals the sources were a several on the MLS and several other off market deals. The MLS deals were foreclosures but now the competition for those on market deals are really competitive now and other investors in my area are driving up the prices and making the BRRRR numbers more difficult to work. So far as far as results go all the BRRRR I've done have worked likely because were being conservative on the repair/renovation side. If you analyze without enough repairs you can be short on the refi because of cash required in the deal. Overall appraisals in my area have been solid too
Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
6y
Hi @Blake Billings, welcome to the BP forums! I'll speak through the lens of my personal BRRRR deals and a few that my clients have done recently.
1. Mostly MLS (specifically finding mis-marketed properties or otherwise constrained ones), and a handful of off-market properties.
2. My very first BRRRR property was purchased for $54k, rehabbed for $12k, and appraised for $80k. It worked out well in terms of efficiency of cycling the cash and it still performs well as a rental.
Last month I helped a client close a BRRRR deal that cost $85k to purchase, $31k to rehab, and has an appraiser-generated ARV of $145k. They'll end up owning a $145k asset that rents like a champ, located in a killer pocket of the city, and have $7k left in the deal.
3. If I could go back and start over, I would be snobby about location AND the lot. There's more to unpack here, but the quick version is: buy a great lot in a great part of town and you'll have better options than a weirdly sized-or-shaped lot in the same part of town.
3. I would have learned how to use hard money for the purchase and rehab. I purchased all in cash and ended up doing a rate and term for the $60K so I could move onto my next project quickly.
Just to clarify - you bought this his with 60K cash and paid for the remodel with another 10K out of pocket? Or did you leverage a loan for the initial purchase?
If it is the first, would mind explaining the benefit to using a hard money lender over your capital in this situation?
Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
6y
@Blake Billings one of the biggest benefits to using debt in general (hard money or IMO more preferably bank loans or construction loans) comes at the refinance step: banks, cowards as they can tend to be, often are uncomfortable cashing out your cash, but rather they want to "make you whole on your costs."
If you've been adding outsized value and have an appreciable ARV on your project, then a refinance amount based on your costs is not ideal. For example from Whitney's example above, the bank would be likely to view her $60k+10k as "costs", and their loan would be based on that cost, leaving 10-25% of your cost in the deal.
Not bad overall, but also not the simplest path to real estate investing considering you could plonk 25% down on an already-completed-project right out of the gate and ski p all that variable middle-ground.
With construction loans or other debt-for-your-project instruments its often more simple to get more favorable LTVs and LTCs for whatever reason.
Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
6y
@Blake Billings I used all cash... which was my mistake. I could only refinance out my purchase price since the rehab was not on the closing HUD. Had I used hard money, I would have only put ~$6K down for purchase (not $60K), 100% for the rehab (rather $10K). I would have had $64K in my pocket to do another project. Instead, I left $10K more of my money in the property, and had to wait until my rate and term refi was done to get my purchase amount back. It boils down to velocity of money.
I contacted small local banks in my area and told them I was an investor and was interested in buying any foreclosures they were holding on to. I had a private lender ready to go so I could pay cash. It works.
Investor · Fort Lauderdale, FL · Member since 2019 · 124 posts · 68 votes
5y
@Will Fraser, when you say you find mis-marketed properties, are there any things in particular that you are looking for with that? Do you have filters set up or just look at new properties that fit your criteria and pounce on them if they are mis-marketed?
Edmonds, WA · Member since 2019 · 61 posts · 46 votes
5y
Found my through a relationship I built with a wholesaler. Purchased for 75k, rehabbed for 15k, ARV is expected at 140k (will be able to cash out refi in February).
So far the deal has been better than expected. My wholesaler hooked me up with both a property manager and a contractor. We had 3 people ask to rent while we were in the rehab process, lease was signed on the day the rehab finished (Took about 1 month, rehab itself was only a week and a half, had to wait for contractors to finish other job).
What I would have done different, and what I am doing different with the BRRRR I'm about to lockdown is set up a little better systems on the rehab. Our contractor works both cheap and great, but since we weren't 100% clear on everything we wanted done (there were 2 fans without blades for example), our property manager had to go back in and put on the finishing touches. Also, some of the cheap rehab wasn't what we thought it would be. We thought we were replacing all the tile in a shower, but they really only replaced the bad tile. Both of those are 100% my fault for not clearly communicating what I wanted (after all, contractors can't read our minds). What my wife and I did was went through Lowes and Home Depot just to price out common items that need to be replaced (floor, bathroom fixtures, etc.). Now what we have is a list of 2 to 3 options for a mid-tier rehab and a higher end rehab for when we start going into better neighborhoods. That way we have an idea of both price of our materials and what the finished product will look like. Also had our wholesaler video call us and walked through the property a lot slower while taking down notes on literally everything. The more clear you are with your contractor, the more likely you will be happy with the end results.
Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
5y
Second, third, and forth what @Whitney Hutten said! I have a client who is in double digits with cash properties right now and trying to refinance all of them to lock in these PHENOMENAL rates and recycle their funds and they are seeing the same "tax" applied. Lenders only want to cash out a percentage of "costs", which means no matter how smoking good of a deal you got, you're not pulling all your money back out when buying cash.
@Reese Newell I look within my geographic HotBox (just made that up, I usually just call it "my box" because it is a rectangle). That area is the one that I have developed a keen sense of "what's out there and what's a good price" and when something comes up that seems off it merits a deeper look. The first place to start with this approach approach is to learn an area and be a student of it.
* If you see a finger in the cover picture of a listing OR you can see that the agent didn't get out of the car to take the picture, with their (dinky) phone, lean in!
I contacted small local banks in my area and told them I was an investor and was interested in buying any foreclosures they were holding on to. I had a private lender ready to go so I could pay cash. It works.
Would you say you got better deals this way or the price doesn't really change much?
Definitely got better deals, but they all require rehab. Perfect for BRRRR projects. You can still negotiate. A couple houses had mold, I got the bank to fund the mold remediation. $3200 each. Bought three houses for a total of $240,000. ARV was $420,000. Rehab of $75,000 total. Refinanced them with a little money stuck in. Got all my money back in 12 months.