A perfect BRRRR without Cashflow is still worth it

Realtor · Houston, TX · Member since 2019 · 351 posts · 174 votes

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $161,000

I bought this property out of the MLS. It's been sitting on market for over 80 days. Was listed for 240k but it needed a bit of cleaning and touch ups for the messy rehab that was done. I negotiated it down to 161k cash. Closed with hard money. Cleaned and painted it for 5k. ARV came back at 255k, I refinanced and pulled all my money out. Is rented for 1800 and is just breaking even. But I got 75k in equity in the deal for 0$ out of pocket. So I still count it as a great deal.

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Austin McDonald

Cleveland, OH · Member since 2023 · 15 posts · 11 votes

Hey Daniel! Learning/aspiring RE investor here...I'm struggling to see how you were able to be out of the deal with 75k in equity with no $ out of pocket?

What LTV for your refinance? Even at 90%, wouldn't that only be 230k to pay off the 166k loan...64k (without any closing costs). What am I overlooking?

P.S I hope this doesn't come off as insulting, just trying to learn!

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Dmitriy Fomichenko
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
3y
Congrats on the deal Daniel!
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Austin McDonald
Cleveland, OH · Member since 2023 · 15 posts · 11 votes
3y
Hey Daniel! Learning/aspiring RE investor here...I'm struggling to see how you were able to be out of the deal with 75k in equity with no $ out of pocket?
What LTV for your refinance? Even at 90%, wouldn't that only be 230k to pay off the 166k loan...64k (without any closing costs). What am I overlooking?
P.S I hope this doesn't come off as insulting, just trying to learn!

2 Reply
Amir Khan
Investor · Coppell, TX · Member since 2018 · 311 posts · 166 votes
3y
Quote from @Daniel Tanasa:

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $161,000

I bought this property out of the MLS. It's been sitting on market for over 80 days. Was listed for 240k but it needed a bit of cleaning and touch ups for the messy rehab that was done. I negotiated it down to 161k cash. Closed with hard money. Cleaned and painted it for 5k. ARV came back at 255k, I refinanced and pulled all my money out. Is rented for 1800 and is just breaking even. But I got 75k in equity in the deal for 0$ out of pocket. So I still count it as a great deal.

Congratulations! Yes well done. When you enter commercial REI, it gets even better. You control the improvements in NOI and therefore control the value of the property. You can BRRRR the same property many times...
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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
3y
Perfect. Cash flow will increase soon, but this was a great deal.
1 Reply
Daniel TanasaBusiness Member
OP
Realtor · Houston, TX · Member since 2019 · 351 posts · 174 votes
3y
Quote from @Austin McDonald:

Hey Daniel! Learning/aspiring RE investor here...I'm struggling to see how you were able to be out of the deal with 75k in equity with no $ out of pocket?
What LTV for your refinance? Even at 90%, wouldn't that only be 230k to pay off the 166k loan...64k (without any closing costs). What am I overlooking?
P.S I hope this doesn't come off as insulting, just trying to learn!

Hello Austin.
The Appraisal came back at 255k. I didn't pull any of the equity out of the deal. I did a bit over 70% LTV, which covered my hard money loan and my closing costs. My new loan amount is almost 180k after I rolled in all the closing costs. And the difference between 255k and 180k is the 75k in equity I was talking about.
I did a rate and term refinance, because I didn't have any money in the deal from the start. My lender finances 100% of the purchase price and 100% of the refinance if you buy bellow 75% of ARV-Repairs. Maybe that's where I was not clear, when I wrote I pulled my money out of it. I actually never had any money in the deal. So the 75k is just equity in the deal, but I didn't pull that money out. It was a 0$ of pocket deal, with a sizable amount of equity left in it.
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Daniel TanasaBusiness Member
OP
Realtor · Houston, TX · Member since 2019 · 351 posts · 174 votes
3y
Quote from @Amir Khan:

Quote from @Daniel Tanasa:

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $161,000

I bought this property out of the MLS. It's been sitting on market for over 80 days. Was listed for 240k but it needed a bit of cleaning and touch ups for the messy rehab that was done. I negotiated it down to 161k cash. Closed with hard money. Cleaned and painted it for 5k. ARV came back at 255k, I refinanced and pulled all my money out. Is rented for 1800 and is just breaking even. But I got 75k in equity in the deal for 0$ out of pocket. So I still count it as a great deal.

Congratulations! Yes well done. When you enter commercial REI, it gets even better. You control the improvements in NOI and therefore control the value of the property. You can BRRRR the same property many times...

Thank you!
That's the plan soon enough.
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Ryan XuPro Member
Real Estate Broker · Bellevue, WA · Member since 2020 · 95 posts · 65 votes
3y
100% great deal.
[email protected]
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