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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  • Property Manager · Allentown, PA · Member since 2017 · 88 posts · 40 votes
    7y

    @Sean Rooks

    Keep getting base hits and you'll be in the hall of fame. Don't undersell yourself. That's a great job on your first BRRR. Great job Sean.

  • Attorney · Na · Member since 2019 · 1 post · 1 vote
    7y

    Congrats Sean! Thanks for sharing, very helpful.

  • Real Estate Coach · Charlotte, NC · Member since 2016 · 399 posts · 341 votes
    7y

    @Gerardo E. Saldana that’s an awesome way of looking at it, thank you for the ratio. Learning from your experience isn’t just in executing the deal and working the rehab, but also in your lead generation. Thanks for the perspective

  • Rental Property Investor · Philadelphia Suburbs · Member since 2019 · 46 posts · 11 votes
    7y

    @Sean Rooks that's awesome Sean good for you! I'm looking for my first BRRRR deal. How did you find yours and did you use the BRRRR calculator on BP to see if the deal worked?

  • Brandon RibeiroPro Member
    Real Estate Broker · Philadelphia, PA · Member since 2016 · 228 posts · 95 votes
    7y

    @Sean Rooks

    I’m in the HVAC industry- and the one thing I can say about the mini-splits is that although they can be cheaper up front, there is just so much more that can go wrong long term, and this is something to keep in mind when it comes to tenants. Another important thing to note is that with a mini-split, you have th is wall mounted units which can be very expensive, yet also pretty easy for a tenant to ruin as they are sensitive to impact if they hit it with furniture or whatever it may be.

  • Adam BraddockPro Member
    Member since 2018 · 6 posts · 3 votes
    7y

    @Sean Rooks, Great write up. Thank you so much for sharing. It's inspiring to see someone just go for it. I'm wondering if you can clarify your total cash after rehab and refinance. It looks like your down payment was $34k, plus improvements of $85k, that'd be $119k for acquisition and rehab. Then a cash out refi of $173k. Did this loan amount include payoff of the acquisition loan, $102k??  That would leave you with $71k, minus the 119k acquisition and rehab...nevermind. I just answered my own question.  Great job!!

  • Member since 2019 · 6 posts · 1 vote
    7y

    Sean,

    Nice work on following through and getting started! Sounds like you gained lots more knowledge of what to do as you continue on.keep up the momentum !

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

    @Sean Rooks beautiful, thanks bud

  • Rental Property Investor · Greenville, SC · Member since 2015 · 17 posts · 10 votes
    7y

    @Sean Rooks great write-up and congratulations  on the first BRRRR. I'm analyzing my 1st potential BRRRRR currently. 

  • Virginia Beach · Member since 2019 · 3 posts · 0 votes
    7y

    Wow! As a newbie, I appreciate all the pro tips you've included in your breakdown. I'm finding tons of gems in here. I just started on my journey to educate myself on investment properties and here you've provided a real life example. I'm going to try my hand at analyzing a few properties. You've done a great job on your first BRRRR! Working towards following in your footsteps. Hey neighbor! :-) @Sean Rooks

  • Homeowner · Carlsbad · Member since 2019 · 35 posts · 16 votes
    7y

    Awesome breakdown - thanks for sharing! Hope to find myself in your shoes 1 year from now, too (just started listening to BP podcasts)

  • Investor · Kauai, HI · Member since 2017 · 65 posts · 43 votes
    7y

    good job learning and your in the black.  win win..

  • Patti RobertsonBusiness Member
    Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
    7y

    I love it.  It looks GREAT!  Good job on increasing rents. Congrats!!!

  • Member since 2019 · 94 posts · 50 votes
    7y

    Congratulations! I appreciate the break down of the numbers and the steps you took. Your details on how you prepared is invaluable to me and I hope to get started with BRRRR after more research.

  • Chicago, IL · Member since 2019 · 91 posts · 21 votes
    7y

    @Sean Rooks Congrats Sean! Really want to learn a lot from you! 

  • Rental Property Investor · OH · Member since 2019 · 21 posts · 9 votes
    7y

    Knocked it out of the park it looks like, congratulations @Sean Rooks! I am currently interested in finding a duplex, triplex property to house hack as my first investment. Did it take you long to find a good duplex to move on? Any recommendations as to items to have ready before making your offer?

    I think this is a great breakdown as well and I will be referencing it on my future endeavors.

  • San Antonio, TX · Member since 2019 · 11 posts · 2 votes
    7y

    Great summary of your deal and the after-action is super helpful to other newbies like myself.  

  • Rental Property Investor · Atlanta GA · Member since 2013 · 122 posts · 83 votes
    7y
    Originally posted by @Sean Rooks:

    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!

    Sooo Beautiful, Congratulations and all the best of luck!

  • Charles HolderPro Member
    Lender · San Antonio, TX · Member since 2019 · 141 posts · 27 votes
    7y

    Nicely done dude, how did you find the property? I'm in Texas i'm trying to get my 1st one done as well. Nice work.

  • Rental Property Investor · WA · Member since 2019 · 60 posts · 15 votes
    7y

    Great work! Impressed by your story. 

  • Member since 2019 · 6 posts · 2 votes
    7y

    Yes great writeup. Ive read up a bit on the BRRRR method but I don't remember anyone mentioning using a conventional loan to initially purchase the property. I never considered that.

    You essentially partner with a bank rather than a private lender or using your own funds. I wonder why I haven't hear about this strategy more often. Your initial interest rate was lower than if you went with a hard money lender anyways.... interesting.

  • Member since 2019 · 45 posts · 8 votes
    7y

    This is so incredibly encouraging.  Congratulations!!

  • Rental Property Investor · St. John'S, NL · Member since 2019 · 12 posts · 7 votes
    7y

    Congratulation on your first step. Your testimony gives me a lot of courage as I just put in an offer for my first Brrrr. Once accepted, I will be happy to share my first Brrrr Strategy experience.

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

    @Jacob Miller

    PM'd you

    @Charles Holder

    I found it on the MLS actually

    @Clint Bronder

    Yeah I actually didn't realize I was doing it differently than most until about 1/2 way through. I think primarily this technique is not talked about much because usually for a BRRRR to work the property needs to be in rough enough conditions that a bank would not loan on it. Luckily this one was right on the edge with some broken windows that had to be boarded up prior to closing.

  • Charles HolderPro Member
    Lender · San Antonio, TX · Member since 2019 · 141 posts · 27 votes
    7y

    are you an agent that found it yourself or did you have one or several looking for you? how did you get the estimates for the property and did you use one of the calculators here? I have some houses im looking at but the part I get stuck on is running the numbers, I need someone to tell me how much work it will be.. an inspector and a contractor.. it'll cost a lot to have these 2 people go look at every house.. what do I do about this? how do I run the numbers.. sorry for the long message, am anxious to see your response and again nice job!

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