Sloooww BRRR Success!

[Matthew Shea]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $672,000
Cash invested: $360,000

This project implemented the BRRR (buy, rehab, rent, refinance) strategy. I purchased the property in an appreciating market where the ARV ceiling was very high. That allowed for renovations to be done at a higher quality and to really maximize the return on investment by adding value at every turn. I was able to get a very good appraisal after all work was completed and make it a successful cash-out refinance, as well as hold it long term as a positive cash-flowing asset.

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

The surrounding market. I saw the potential in it to rehab and hold.

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

It was sitting on the market for 8 days in the middle of December (dead time for real estate in Florida). I negotiated the price by addressing my concerns with market volatility and rehab unknowns.

How did you finance this deal?

I purchased it with a conventional mortgage.

How did you add value to the deal?

I completely gutted the property and rehabbed the inside and outside. The inside was restructured to be more functional and meet today's standards. The outside landscape was completely redone to appeal to higher end renters.

What was the outcome?

The property appraised at the top of surrounding comps. It's value holds because of its location. I was able to cash out all of my rehab funds plus extra, all while leaving in the necessary amount to keep my mortgage where it was. This allowed me to maintain a healthy cash-flow after all expenses were paid.

Lessons learned? Challenges?

The challenging parts were managing rehab funds and allocating them to the right places which add the most value.

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

I am a real estate agent myself and complete most of my work in-house unless subbed out for contracting.

[Matthew Shea]

@Greg Kasmer The property appraised just over $1.7M. It's a duplex and each side rents for $4k+ fully furnished on an annual basis. The new mortgage is right at $7k with 40% equity left in the property. I was able to cash out just around $400k which reimbursed the rehab funds plus some. After expenses, I cashflow just over $1,000/month. 

Note: When I purchased the property I figured the ARV would be about $1.1-1.2M. I based the initial renovations off this estimation. Shortly after buying there were several sales nearby that boosted that ARV higher than I could imagine. That encouraged me to pour more into the property and trust mine would appraise as well, which it did. I own a rental same size, farther from town, that was already making $4k/month long term where the average rentals were $2,500. So I had confidence I could retrieve a higher rental rate, especially since this one was walking distance to a downtown area. I just didn't realize how much I could cash out by improving it until afterwards.