BRRRR Strategy for the last 4 months - Hope to flip next!!!

Real Estate Deal Analysis & Advice
10yFollow

BRRRR Strategy for the last 4 months - Hope to flip next!!!

THU NGUYEN
Investor · Sugar Land, TX · Member since 2016 · 109 posts · 46 votes

Having found BP 4 months ago, I spent many late nights reading the forums, listened to podcast on the way to work, on the way home from work.  I was very motivated and determined to get back into RE so now 4 months later I would like to thank all the BP members here and happy to report back the progress I have made  in the last 4 months:

1st house:  closed July 1, 2016, bought from wholesaler for $113K, rehab $10K.  Refinanced on Aug 19, 2016 for 30 years at 4.625% , appraisal came in at $135K.  Rented out for $1350/month.  Tenant moved in on  Sept 1.  

2sd house: closed Aug 8, 2016, bought from FSBO for $100K, rehab $1.5K, rented out for $1270 (including lawn service), tenant moved in Aug 13. In process of refinancing so I am anxious to find out what the appraisal value is. Houses in the same subdivision with the same sq, same year built is being listed for $125K.

3rd house: closed Aug 12, bought $134K from wholesale, rehab: $7K. In process of refinance but got appraisal report back today at $185K. My investment loan is usually at 75% LTV so that means I can get back $139K. I will have only $2K in the deal. Current listed for rent at $1550/month.

4th house: in contract to close on Oct 4, bought $120.5K, rehab is expected to be $5K top. ARV at at least $150K (being very conservative). Rent is expected to be $1450.

I have also done 3 private lending loans to other investors: 1 loan at 11%, 1 loan 12%, 1 loan at 8% and 15% of profits. 

I'm hooked, I have so much fun doing RE.  I guess I have found my calling.  I have fun doing it even if it doesn't pay.  I can't say that about my job...if I don't get pay, I wouldn't do it at all.  Will I be able to do RE full time someday?  That would totally be my dream job.  

Anyway, I have 2 rentals that I bought from builders more than 10 years ago.  Even though they appreciated but since I refinanced and got cash out to buy the properties above, cash on cash return based on today market is not great (6%).  I am trying to do seller financing to my tenants now on these 2 old properties.  We will see how that goes.  Owner refinancing would be something new to me as well.

THANK YOU BP members for helping out, answering questions for newbie.  I found a coach here at BP, Matt Huber and have met many other investors in person.   I am hoping to get enough experience to do a flip next. 

7Reply
13 views

Most Popular Reply

Matt Huber
Rental Property Investor · Eureka Springs, AR · Member since 2016 · 39 posts · 45 votes
10y

Congratulations Thu, but I need to correct you.  You did not find a coach here on BP, you forced me to be your coach!  I am not actively looking to coach people and have no formal program to do so.  You are the exception and exceptional!  It is fun working with you.

3Reply
See this reply in the discussion

21 Replies

Jump to latestLatest
  • Kevin Longeuay
    Investor · San Diego, CA · Member since 2016 · 49 posts · 15 votes
    10y

    Congrats on your recent successes! That is very exciting :)

    After reading your post and running your numbers, the BRRR strategy finally clicked for me! Thank you so much

    Btw, all I've heard about lenders on a refi is that you can only get up to 70% LTV. How were you able to get 75%? Is that merely shopping around for the right lender?

    Congrats again and thank YOU for the post

    0Reply
  • Kevin Longeuay
    Investor · San Diego, CA · Member since 2016 · 49 posts · 15 votes
    10y
    Also, I thought you could only do a cash out refi after 6 months but you were able to do it within a couple months for your first property. Can you elaborate on that? Thank you!
    1Reply
  • THU NGUYEN
    OP
    Investor · Sugar Land, TX · Member since 2016 · 109 posts · 46 votes
    10y

    @Kevin Longeuay...All of my rentals, I borrowed at 75% LTV. I can borrow at 80% but it will cost more on closing cost so my broker doesn't recommend me borrow at 80% LTV.

    I didn't do cash out refi, what I did was I gave me my cash to my family, who then loan me back so it becomes a private loan.  You can refinance as soon as the title company records the deed, the notes with private loan lender (meaning your family)...so I start the refinance process 4, 5 days after I close on the purchase.  It takes 3, 4 weeks for appraiser to come out and appraise your property so the sooner you kick off the refinance process the faster you can get your cash out.  Also the rehab would have been done already, 3-4 weeks later.   

    If you are interested in reading more about this type of private loan, look up Matt Huber.  He wrote a very detailed post on this "friendly loan" process.  I literally copied his strategy and apply it for my 3 purchases.  I let the title company know this is my private loan which is a loan to myself with my money via a family member, same with my broker....also let him know so that there is nothing suspicious about it.   

    2Reply
  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    10y

    Good to see such keenness and willingness to act; but, can I suggest a slow-down now?

    Your third house looks the most closely aligned with BRRRR, but it STILL fell a bit short. The idea is for each refi is to get you back ALL of your original outlay ie. to not fall short by even $2k.

    Another idea about refi is that you should aim to achieve (low) conventional interest rates.

    I certainly agree that you shouldn't go above 75% leverage (especially if paying 8-12% interest).

    Once you run out of private Lenders, you'll likely be limited to 70% of appraisals thereafter, meaning that your future purchases should look for greater equity upside from the start. 

    At this stage, your private Lenders might be making more out of you than you're making! My 2c...

    0Reply
  • Kevin Longeuay
    Investor · San Diego, CA · Member since 2016 · 49 posts · 15 votes
    10y

    @THU NGUYEN thank you I will definitely connect with Matt to learn more about that process

    Another question for you... were you the one determining the rehab costs or were those done by the wholesaler? Also, I assume these are mainly cosmetic rehabs (paint, carpet, very minor repairs) to increase home value and make the property rentable rather than full renos for kitchen/bath upgrades? 

    0Reply
  • THU NGUYEN
    OP
    Investor · Sugar Land, TX · Member since 2016 · 109 posts · 46 votes
    10y

    @Kevin Longeuay, I had 2 contractors quote me for the rehabs and decided on one. The initial repair quotes by the wholesaler is pretty close to what the GC quoted. The rehabs were minor: paint/carpet/tile/laminate/counter tops/sidings. The houses I bought just need a little bit of work, not too much. For newbie, I think that's all I can handle anyway. Buying from wholesaler is totally a new experience vs buying from MLS. You have to act SUPER FAST. My third purchase, from the time they blast out the deal via email, to viewing, to make a decision to buy...it was all within 60 min. I had to pay $4K over asking price because the wholesaler also had another buyer that wanted the house. It was fun but can be a huge risk of loosing your shirt if you don't know your numbers. I just wanted to get my feet wet so I am ok buying with $10K equity. Other experience investors for sure will not.

    0Reply
  • Matt Huber
    Rental Property Investor · Eureka Springs, AR · Member since 2016 · 39 posts · 45 votes
    10y

    Congratulations Thu, but I need to correct you.  You did not find a coach here on BP, you forced me to be your coach!  I am not actively looking to coach people and have no formal program to do so.  You are the exception and exceptional!  It is fun working with you.

    3Reply
  • Brandon H.
    Investor · Houston, TX · Member since 2014 · 8 posts · 2 votes
    10y

    Congratulations @THU NGUYEN .  I can see the excitement from you ! I am sure we all can learn from each other in this great BP forum to find way to invest as I was one of them too (Newbie)

    0Reply
  • Account Closed
    Investor · Sulphur, LA · Member since 2013 · 126 posts · 41 votes
    10y

    @Kevin Longeuay It just takes time finding the right banker and building a strong relationship with them. I can get 80% of subject to appraisal on any rental I'm buying (so they fund 100% of the deal as long as your buying right). Spend time talking to lots of local banks and you'll eventually find the right one.

    1Reply
  • Jean NicolasPro Member
    Investor · Washington, DC · Member since 2016 · 22 posts · 3 votes
    10y

    @Thu great going with REI. I'm also a newbie and find this very inspiring!

    Can you drop link to Matt Huber's post? Not able to find it on BP.

    Thank you!

    0Reply
  • Matt Huber
    Rental Property Investor · Eureka Springs, AR · Member since 2016 · 39 posts · 45 votes
    10y

    The "friendly loan" detail is  buried near the bottom of this very long post.  The discussions cover many different topics so you may want to go straight to the bottom if you just want to learn the "friendly loan" concept.

    0Reply
  • Matt Huber
    Rental Property Investor · Eureka Springs, AR · Member since 2016 · 39 posts · 45 votes
    10y

    https://www.biggerpockets.com/forums/88/topics/316...

    Oops, here's the link

    1Reply
  • Kristopher HanksPro Member
    Rental Property Investor · Davenport, FL · Member since 2016 · 593 posts · 382 votes
    10y

    Talk about going back in with both feet....you sure did that. Way to just go after it! I hope once I get started I have that same courage to just go for it and move around obstacles like they are not even there. 

    1Reply
  • Kevin Nguyen
    Houston, TX · Member since 2016 · 12 posts · 1 vote
    9y

    Wow congrats!  I hope to be able to think and act that quickly on deals.  

    I am trying to understand the math here and need confirmation. I am a newbiee so this is not definitely not downplaying your achievement. With the firsthouse the appraisal came in at 135k so an ideal BRRR based off 75% LTV would have a purchase price of $101k MINUS 10k in repairs. So ideal purchase price would have been 91k. Since it was bought at 113k and rehabbed for 10k then there is about 32k that is tied up in the house. Correct? For a person strapped for cash they might not have enough for the next deal.

    However the house meets the 1% rule which makes a good rental.  I need a mentor..and cash lol.

    1Reply
  • THU NGUYEN
    OP
    Investor · Sugar Land, TX · Member since 2016 · 109 posts · 46 votes
    9y

    @ Kevin Nguyen

    Total cash out of my pocket including refinance closing cost for my first deal is about $28K.  My cash on cash return is expected to be at 19% (CF first year less commission of 5213/27695).

    You will find that it's VERY HARD to purchase at 75%.  I will buy at 80 or 85% but these deals are just not out there.  It's very competitive and buyers will buy fast with not much equity.

    My second deal, the total cash out is $10K with coc return of 59%; third deal total cash out is $2.6K, coc return is 113%; and for my fourth deal I expect total cash out of $8.5K, coc return at 41%. 

    I would LOVE to learn how seasoned investors buy with no money.  I guess it's possible if you find a really good deal.  As you can see I am new, so I am ok and happy with my results.  Goodluck!

    0Reply
  • Rapy Narruhn
    Vancouver, WA · Member since 2015 · 98 posts · 46 votes
    9y

    Congrats @THU NGUYEN!! 

    0Reply
  • Shawn AckermanPro Member
    Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
    9y

    @THU NGUYEN I really like your enthusiasm and passion for REI. Seems like you found your calling for sure! Great work and congrats!

    0Reply
  • Taye N.
    Hayward, CA · Member since 2009 · 258 posts · 62 votes
    9y
    Congrats, i wish homes were this cheap in cali
    0Reply
  • Kevin Nguyen
    Houston, TX · Member since 2016 · 12 posts · 1 vote
    9y
    Originally posted by @THU NGUYEN:

    @ Kevin Nguyen

    Total cash out of my pocket including refinance closing cost for my first deal is about $28K.  My cash on cash return is expected to be at 19% (CF first year less commission of 5213/27695).

    You will find that it's VERY HARD to purchase at 75%.  I will buy at 80 or 85% but these deals are just not out there.  It's very competitive and buyers will buy fast with not much equity.

    My second deal, the total cash out is $10K with coc return of 59%; third deal total cash out is $2.6K, coc return is 113%; and for my fourth deal I expect total cash out of $8.5K, coc return at 41%. 

    I would LOVE to learn how seasoned investors buy with no money.  I guess it's possible if you find a really good deal.  As you can see I am new, so I am ok and happy with my results.  Goodluck!

     Hey Thu

    I'm new too and what you did in 4 months is great, really. I don't have enough cash to buy like that so I'll have to find cash.   Good to know a newbie can do so well. Gives me inspiration.  Congrats

    0Reply
  • Taye N.
    Hayward, CA · Member since 2009 · 258 posts · 62 votes
    9y

    Hi Thu

    Is Sugarland a good place to invest? I am from California but I have family in Houston. Looking to invest out of state.

    0Reply
  • THU NGUYEN
    OP
    Investor · Sugar Land, TX · Member since 2016 · 109 posts · 46 votes
    9y

    Sugarland is a great place to live, really good school, some older neighborhood has low tax rate, nothing as low as california though. Rental is not that great since most of the time you will not get the 1% rule for it based in today market. Houses have appreciated in the last 4-5 years but rent has not kept up with the appreciation. For an example, I have a house that is appraised at $230K, but rent is only $1800. Another one appraised at $172K, rent is $1450 so in term of CF and COC return, it's not that great. But it might appreciate more than other places...who knows...wish I have a crystal ball..:)

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free