Last week we closed on our first BRRR multifamily property! We've employed the strategy a few times now, but never on a multi-unit property. In our tight market (Olympia, WA), it's so rare to find a deal anymore, especially on the MLS. Which is why I was surprised when a 4-plex hit the Olympia market (right downtown!) with an asking price of $325k (disclosure: I live on the coast. No doubt midwesterners are shaking their collective head). We offered a strong $370k cash, knowing the property is easily worth somewhere in the $450k-475k neighborhood (the property was marketed very inexpensive as this was an estate sale property.) Despite 19 offers on the property within just 2 days, our offer was a winner!

So here's how it works out: we bought using hard money, which costs us about $7,500. Total "investment" is $377,500. There is NO REHAB. The previous landlord had done wonderful maintenance. We'll just continue to make small repairs and minor upgrades as we would any other buy-and-hold property. Let's say this property appraises for $475k (we feel this is conservative with two recent sold comps at $475k, $500k, one pending currently at $525k). Our lender wants 75% LTV to refi, so they'd loan $356k. So, while we don't get a FREE property here, we only have to bring ~$20k to the table to acquire this fourplex. Not sure about you, but I'll give up $20k cash for $100k equity any day of the week!

Why did they pick our offer? After speaking with the listing agent, they definitely had options! They had an escalation clause that capped at $467k, and on top of that they had a no limit escalation. If the seller wanted to accept these offers, the sales price would have been $470k!! Not to mention there were a few other offers over $400k. In speaking with the agent, they chose my offer because I wrote them a letter! Obviously money wasn't the most important thing to these sellers. I told the sellers I flipped the house right next door and that I LOVED the neighborhood, that after seeing the fourplex I knew I wanted to OWN it. I told them my intent was to keep rents lower than market rents for at least 24 months (the owners were advocates for affordable housing), and told them if rents were raised to market that I'd donate 10% of net profits toward our favorite non-profits and charities as long as I own the building. The letter worked! My wife and I are calling it the $100k letter :)

I'll update with actual appraisal values. You never know in the BRRRR game, and the appraisal value is critical! What do you guys think?