My First BRRRR Deal in San Diego, CA!

[Jon Khalil]

Investment Info:

Condo other investment.

Purchase price: $490,000
Cash invested: $6,400

A 3 Bed, 2.5 Bath 1400+ Sq.Ft. Condo located 3 minutes away from SDSU. This property was purchased using 0% down and 0 PMI from our Credit Union. 6.25% interest rate. Closing costs were about $8300 and we received a seller credit of about $3350. We plan to fix it up doing all the work ourselves, get it rented by December 1st, and refinance once rates are back in the 2-3% range to see real cash flow.

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

It was the best way to get our foot in the door. After researching all different types of methods of investing in Real Estate, I found that the BRRRR method was the best for long term wealth and being able to cash-out refinance is the key to receiving tax free money to go buy the next property.

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

Redfin, we looked at comps and had to make an aggressive offer since this property was in a multiple offers over listing situation.

How did you finance this deal?

We invested 0% down and only paid closing costs, which after the seller credit we actually ended up getting about $4K back.

How did you add value to the deal?

TBD- we are planning on upgrading the floors, fixtures, paint, and Kitchen.

What was the outcome?

TBD/In process

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

Twana Rasoul is a great Realtor here in the SD area, and he made our transaction smooth and we were very happy with the end result. I highly recommend him.

[Dan H.]

Quote from @Tim G.:

This feels like a very thin deal, banking on rates in the 2-3% range is highly speculative and risky. Did the realtor you're referencing here back you up in this thought process? 

 I share Tim’s concern. I will say @Twana Rasoul and I typically have similar mindset but here are some concerns: 1) multiple offers basically implies you paid at least retail (there are some exceptions, but they are rare) 2) I see no value add costs and no ARV 3) the zero down implies to get anything from the refi will require at least a 25% value add (assuming #1 is correct) 4) these "high" interest rates are very reasonable by historical standards. We may never see sub 3 rates again. No one knows if or when rates will drop appr3ciably. 5) prices have fallen over the last few months. Assuming we are not at the bottom implies the value add must first recover any loss of value from the depreciation to even recover your value add costs.

Local Flippers have heavily curtailed their acquisitions over the last few months. No one knows what the future holds, but I would not acquire as an investor anywhere close to retail (I typically do not look at paying retail) at this uncertain time.  I may be interested at 20% below retail.  Even at 20% below retail, my holding costs will be greater than having paid retail at the beginning of this year due to rates doubling.  

I wish you the best and hope my concerns are all unfounded.  

Good luck