Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
Investment Info:
Small multi-family (2-4 units) buy & hold investment.
Purchase price: $270,000 Cash invested: $60,000
A duplex that needed a LOT of work. It was an expired MLS listing. I wrote one letter (and my only mailed letter to this date) and the seller responded and we negotiated a price that worked for our numbers.
What made you interested in investing in this type of deal?
It was eligible for an STR permit in Colorado Springs.
How did you find this deal and how did you negotiate it?
It needed a LOT of work and we negotiated a good price. We remodeled and fixed:
-sewer line
-total replumb of both units
-jacked up central floor beam to level floors
-new water line from the city tap
-landscaping
-new LVP floors everywhere
-walls insulated
How did you finance this deal?
Hard money for 330k. This allowed us to buy the property for 270k and have 60k for remodel and fixes. My business partner and I both put in 30k of our own money as the total rehab and furnishings cost 120k.
How did you add value to the deal?
We fixed all the things listed above. We landscaped the property and added a fire pit slab, hot tub pad, and electrical.
What was the outcome?
We paid designers to design the home. We fully furnished, decorated, and added a fire pit and hot tub. We then had the appraiser over to see our great work. It appraised for 425k! We were able to pull all of our money out except 60k. Pretty good for a cashflowing property and 100k of equity.
Lessons learned? Challenges?
BRRRR is a lot of work but awesome. Again double the time a contractor will say it takes to get a job done.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Here are 10 Key Things You Need to Know About the BRRRR Process:
1. Change is inevitable. Your plans and timeline will change. It seems like this happens with every single deal. No matter how carefully you plan, the unexpected crops up or there are unforeseen delays. The key is to understand this and to plan for it! No, I’m not trying to be smart. The point is you should account for changes in your timeline and your plans, so when things crop up, you’re ready to deal with them.
2. You’ll go over budget. This one goes hand in hand with the first. If your plans and timeline change, then that invariably means your budget will change. Again, plan for this. Expect it to happen.
3. There are highs and lows. This is just as true with investing as it is in life. There are always ups and downs. The trick is to work through them. If you feel your project is dragging on longer than you thought and you’re bogged down, the best solution is to lower your head and work through it.
4. Develop and nurture A-team relationships. Relationships move real estate. Relationships help you find deals, fix properties, locate tenants, and sell a house—and everything else in between. So form and never neglect those powerful relationships with (who I like to call) your “A” team. These key players include contractors, agents, lenders, title companies, inspectors, and even other investors. Nothing pays bigger dividends than strong relationships.
5. Recognize good design. You want to create a “wow” factor on every level of a fix, rent, and sale. That’s where great design really comes into play. Do more than the basics. Painting, new floors, and shiny appliances are vital, but where can you truly transform a property into something more valuable? Turning a three-bed into four dramatically increases value and wows a potential tenant or buyer. Taking down walls to open up an older home and create a more spacious and modern look really has a tremendous effect. Finishing basements and adding amenities gives your property that feeling of desirability you want.
6. Know when enough is enough. Great design and wowing improvements can really make a big difference—but you’ve got to be careful you don’t cross the line. It’s important to know when you’ve done enough and more importantly, when not to go further. It’s entirely possible to rehab yourself into the poor house. It’s great if you rehab a property to be four beds and three baths with a pool. However, if all the other houses around you are 3/2 and no pool, then your property suddenly becomes the overpriced big fish in a small pond. And you’ll be in trouble!
7. Set up weekly contractor meetings. Stay on top of the rehab. Don’t micromanage, but also don’t turn your back and just assume it’s all going perfectly. Meet every week with your contractor to discuss the project’s progress, budget, and timeline.
8. Mistakes will happen. Sorry to burst your bubble, but this is something you can’t avoid. I’m not saying there will be mistakes on every deal; however, you should expect them to crop up from time to time. This goes back to the first point I made: A wise investor will plan for errors. Give yourself enough wiggle room when estimating to account for mistakes without completely blowing your budget out of the water.
9. Communicate often with your contractor. The last two points tie into this one, too. The best way to avoid or limit mistakes is to communicate with your contractor often. I’m not talking about the weekly meeting; that’s one thing. But talk to them every day or two and just check to make sure everything is going well.
10. You can do it. Anybody can be a successful BRRRR investor if they simply are willing to do the work. You also have to be brutally honest with yourself in regard to your strengths and weaknesses. Acknowledge the areas in which you’re skilled and the areas in which you need expert help. There’s no sense in trying to reinvent the wheel. You can’t be an expert in everything, so fill in the gaps with those who are.
