My 1st BRRRR a base hit!

My 1st BRRRR a base hit!

Sean RooksPro Member
Rental Property Investor · High Point, NC · Member since 2017 · 272 posts · 304 votes

Just finished my first deal, a BRRRR triplex in Norfolk, VA

BUY: 2400 sqft triplex:

1) 1bd/1ba 550sqft @ $550/mo

2) 1bd/1ba 625 sqft @ $600/mo

3) 2bd/1ba 1250sqft @ $800/mo

Purchase Price: 136k

Rehab Budget: 60k

Expected ARV: 265k

Expected final rents: $600, $700, $950

Analysis:

REHAB:

RENT: We did a little non-standard rental here. Since it was already rented out, we had to get creative with the rehab and renting.  and We started with the exterior, landscaping, and new HVAC and windows. 

One tenant was evicted for non-payment, so we renovated that next. Then asked if anyone was interested in moving into the newly rehabbed unit while we renovated theirs. This worked for the other 2 units. All are re-rented now (2 to origional tenants) at the prices reflected below

REFINANCE:

REPEAT: As always, there are some errors I want to improve upon for the next. I hope this well help some others. Systems will go into place to prevent repeating errors, and repeating what was successful, 

1) Purchase price too high. I bought this off the MLS, I think I could have negotiated it lower, and in the future will look to more off market deals. I don't regret buying it, as a learned a ton and it still cash flows nicely.

2) Under estimated rehab budget. It was originally built in 1920s. So HVAC costly much more than I budgeted. It was worth it to attract a higher quality tenant, remove the window AC units, and get the tenants paying their own utilities. Next time I'll know whats involved in an older home and have a better estimate on rehab costs for HVAC. (side note: ductless mini-splits are highly efficient and cheaper to install than a full vented system in an older home. Just make sure its a moderate climate as they don't provide tons of heat in cold winters.)

3) Not understanding all the ways an appraiser can appraise small multifamily (read: overestimating ARV). I used only the $/sqft method to find an ARV for this property. ARV is arguable most important number in the analysis. Since I was off by 20k, I left 20k more in the deal than I wanted to. The appraiser used a combination of $/sqft, $/room, and $/apartment. They then averaged the three. My $/sqft was right on, but the other two were lower, bringing the average down.

Summary: With the glass is half full attitude I count this as a base hit. It cashflows at $121/door (goal: $200/door), at an 8.5% CoCROI (goal: Infinate, min goal: 10%), I learned a ton, and got my feet into the small multifamily door. Ready to repeat!

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Most Popular Reply

Norfolk, VA · Member since 2019 · 3 posts · 14 votes
7y

@Sean Rooks This is a great breakdown of your first multifamily BRRRR. I hope to get to do this one day with a single family unit in Hampton Roads.

I would like to use your breakdown as a learning opportunity. How long did it take to prepare to my such an investment? Did you already have the financing (down payment, pre-approval in place well beforehand? Did you already have a contractor in place prepared to do repairs? I'm really curious because it seems like it all came together very well for you and you come off as an extremely prepared individual.

See this reply in the discussion

114 Replies

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  • Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    Congrats and awesome post thanks for sharing!

  • Realtor · Omaha, NE · Member since 2019 · 3 posts · 1 vote
    7y

    Well done. I have been reading and listening to a lot of podcasts on the BRRRR method lately and hope to do one in the future. Thanks for posting and best of luck in the future.

  • KILLEEN, TX · Member since 2015 · 4 posts · 1 vote
    7y

    ok I have a property and trying  brrrr method made it all the way to the refiance part and that were my issue is here are the numbers potential arv 118k loan bal 56k 3.62% piti 529 per month monthly rents are 1175 per month cash flow 546 per month so are using someone that looks at the assets or are you having to get approved for refinance were they are looking at credit and dti

  • Rental Property Investor · Cumming, GA · Member since 2017 · 66 posts · 15 votes
    7y

    @Sean Rooks: Very Nice. Good thing is you started with Multifamily. That will keep rolling.

    Good luck on your next deal.

    Thanks,

    Trin

  • Flipper/Rehabber · Huntville, AL · Member since 2018 · 4 posts · 3 votes
    7y

    Good read. Thanks for sharing

  • Rental Property Investor · Sedan, KS · Member since 2016 · 125 posts · 92 votes
    7y

    @Sean Rooks CONGRATULATIONS! I couldn't load any of the pics (problem on my end) but looking at the numbers and your story it sounds like alltogether things went well. Success stories like this is the only thing that kept me in real estate when i was about to give up and the only thing pushing me forward when things get tough. Good work!

  • Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    7y

    Great job! First of many! 

  • Rental Property Investor · Lowell, MA · Member since 2016 · 33 posts · 9 votes
    7y

    Congrats!! This is very informative, thank you for sharing.

  • Real Estate Broker · Tampa, FL · Member since 2017 · 16 posts · 7 votes
    7y

    Not too bad man. Congratulations!

  • Member since 2019 · 26 posts · 13 votes
    7y

    @Sean Rooks… congrats and appreciate the sharing

  • Sean RooksPro Member
    OP
    Rental Property Investor · High Point, NC · Member since 2017 · 272 posts · 304 votes
    7y

    @Brandi Graham

    Yes exactly!

    @M Boyd

    The bank I used was a portfolio loan, but conventional not commercial. Typically convention will focus on personal finances. Commerical will focus on the asset itself. Cons of commerical are the typically shorter loan length and typically higher rates.

  • Ken B.Pro Member
    yucca valley, CA · Member since 2015 · 77 posts · 33 votes
    7y

    @Sean Rooks 

    Super exciting and very happy for you. Your numbers are great. Guess what, now they begin to get easier. Good job and keep going.

  • Perris, CA · Member since 2017 · 20 posts · 15 votes
    7y

    Congratulations Sean! 

    As others have said, keep the momentum going!

    You mentioned that it took you about 6 months of combing the MLS to analyze 100 properties, make 7 offers, and get 1 accepted. These are your ratios so far 100-6-1.

    So... what could you do so that you can analyze another 100 properties in 3 months (half the time) or less?

  • New to Real Estate · Schaumburg, IL · Member since 2019 · 29 posts · 6 votes
    7y

    Well done! Id love to hear about some of the details. Im still trying to complete my 1st deal.

  • Kasey GourleyPro Member
    Knoxville, TN · Member since 2015 · 33 posts · 7 votes
    7y

    @Sean Rooks

    Congrats on your first deal! In my opinion this is a double at minimum, considering a lot of people lose money or breakeven on their first deal and it even meets @Brandon Turner minimum cash flow per door of $150/unit. Nice job!

  • Sean RooksPro Member
    OP
    Rental Property Investor · High Point, NC · Member since 2017 · 272 posts · 304 votes
    7y

    Not to brown nose, but I need to give credit where it's due!

    I am 100% confident this would not have happened without BiggerPockets. Specifically the BP Podcast. So thank you @Joshua Dorkin, @Brandon Turner and all the BP staff for making BP what it is, podcasts, webinars and the tons of free education available here. You made me successful.

  • Boston, MA · Member since 2019 · 35 posts · 21 votes
    7y

    Great breakdown, thanks for sharing. This has definitely inspired me and I guess the key thing is to learn what went wrong and what needs to be improved and move on to the next deal. All the best.

  • Brandon OwensPro Member
    Flipper/Rehabber · Atlanta, GA · Member since 2017 · 32 posts · 17 votes
    7y

    @Sean Rooks Congrats Sean... you're in the game. I love the breakdown. I too share a similar experience and give a lot of credit to biggerpockets for learning the pros and cons of this strategy.

  • Flipper/Rehabber · Roseville, MN · Member since 2018 · 73 posts · 38 votes
    7y

    @Danielle Sheridan

    Find an awesome realtor at a meetup or via Facebook/referral/BiggerPockets where ever you can find one. Look for an investor friendly one in your area they can help with comps. ARV is what the house should appraise for after renovating (after repair value). A good realtor that knows the market will be good at this. You can also use some of the real estate apps to find recently sold in the area. Key is to ensure the comps are close to the house on the market you are looking at, within reason for similar square footage and similar bed/bath combos. Don't compare a 1,000 square foot 2bed/1bath with a 1500 sq for 3bed/1bath. These are good for quick analysis. If I am going to offer I have my realtor pull real comps to confirm it. Then offer after that.

    I am sure there is a webinar on ARV somewhere that's worth looking into.

    Best bet is to find someone in your market that you can buy coffee for and ask them about it :)

    Happy learning!!

  • Member since 2019 · 17 posts · 2 votes
    7y

    congrats bud!

  • Rental Property Investor · Discovery Bay, CA · Member since 2017 · 26 posts · 15 votes
    7y

    @Lucas Whaley @Sean Rooks

    Awesome and congrats! I'm a bit confused...I thought with a BRRRR you want to purchase the property in cash so you can refi 75-80% out of the property. In your case are you pulling the capital strictly out of the down payment amount? Hope that makes sense. Thanks and keep it rolling. Hoping to BRRRR my first property in the next 6 months.

  • CA · Member since 2018 · 83 posts · 44 votes
    7y

    Congrats on the win, @Sean Rooks!!

    The ARV always terrifies me. I want to do a flip for sure but me not knowing how the ARV could be calculated always worries me.

  • Charlotte, NC · Member since 2018 · 4 posts · 4 votes
    7y

    Great share and well put article! That fact that you learned from your mistakes, got your foot in the door with multi-family, underestimated, and still cash-flow nicely is amazing. I am originally from the area and would love to invest in multi-family back home. Is this property in a flood zone? I know that Norfolk in one of the worst flooding cities in the Tidewater area. Did you have to factor in a high premium for flood insurance? Keep up the great work! 

  • Sean RooksPro Member
    OP
    Rental Property Investor · High Point, NC · Member since 2017 · 272 posts · 304 votes
    7y

    @Eric Kulling

    Eric, you are correct. My BRRRR was a little non-standard. Since the property wasn't in horrible shape it qualified for conventional financing. In this case you have the option to pay cash for the initial purchase or get financing. Financing made sense for me because of the long turnaround for the rehab (moving tenants around) and the lower inital investment required. Though I incurred some interest cost, my cash wasn't tied up for a year. Then at the refi I was able to pull out my dowpayment and a portion of the rehab. A home run would be paying yourself back completely or even making money!

  • Real Estate Investor · Opa Locka, FL · Member since 2014 · 33 posts · 8 votes
    7y

    @Sean Rooks Congratulations on getting your feet wet. A lot of people want to get into real estate but are afraid of making the first step. If at the least you've gotten experience. That in itself is worth it. Congrats again.

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