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!

107Reply
451 views

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

Jump to latestLatest
  • Flipper/Rehabber · Post Falls, ID · Member since 2018 · 11 posts · 0 votes
    7y

    Great job, thank you for taking the time to post your experience. I haven't had any luck in my area as everything isn't over priced and goes over asking. Hope to come up with off market deals and My dealing with a wholesalers here was a bad experience! Who accepts an offer then backs out stating there is a higher offer. No credibility or ethics! Keep up the good work!

    Julie

  • Rental Property Investor · SF Bay Area · Member since 2016 · 234 posts · 103 votes
    7y

    @Sean Rooks congrats! Great attitude, I'm sure you will have more success down the road, cheers!

  • Philadelphia, PA · Member since 2016 · 3 posts · 0 votes
    7y

    @Sean Rooks Congratulations!!! I'm new to real estate investment too and analyzing a duplex now. May I know did you use the regular personal conventional mortgage or used a commercial loan? Did the loan cover both purchase and rehab cost? For those 1920s houses, did you change the plumbing and electricity? 

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

    @Charles Holder

    I used a Real estate agent to close the property, but I found it on Zillow. As for the calculators, yes you can see on the original post I used my own calculator for the initial and the BP calculator for the actual final numbers. For estimates, yes you will need to have a contractor (or 3) come out and do a walk-through to get a rehab analysis (usually these are free). As for the inspector, yes I would recommend getting one once your offer is accepted. Its worth it when you are starting out and don't know what to look for. I've heard of more experienced investors skipping this step once they have a few under their belt. 

    @Amy Bai

    I used a conventional mortgage. The loan covered the purchase of the home, I used private money and my own money to fund the rehab. As for the electrical and plumbing, a lot of it had already been replaced and upgraded, so most of the rehab was cosmetic, but we did have to add quite a few new outlets and replace some cast iron plumbing with PVC. 

  • Colton, CA · Member since 2019 · 105 posts · 24 votes
    7y

    Congrats on your deal, Are you planning to get more properties in the near future?

  • Rental Property Investor · Clovis, NM · Member since 2018 · 118 posts · 55 votes
    7y

    Sean,

    You posted your expected rent increases in your initial post. Did you end up achieving those? I know in my first deal I fell about $50 short per month in my estimate but my numbers still work and I am happy with my results.

    Kevin

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

    @Kevin Sack yes we did achieve those rents. Additionally the tenants agreed to pay it upon their move back in after the renovations. The one vacant apartment rented out within 2 weeks. Wish I could have found room for a 4th unit in the attic, but in the end it looked like it would have been too costly for the return. 

  • Sean RooksPro Member
    OP
    Rental Property Investor · High Point, NC · Member since 2017 · 272 posts · 304 votes
    6y

    Hey all, quick update below! Just sold my first flip, props to @Claudio Valdivia for all the help finding and selling!

    https://www.biggerpockets.com/forums/223/topics/823268-first-flip-another-base-hit

  • Real Estate Agent · Augusta, GA · Member since 2020 · 9 posts · 1 vote
    6y

    Currently reading “The Book on Rental Property Investing” by Brandon Turner..... very motivating to see other beginners making moves. Hopefully my first property will be successful also. Keep doing what you”re doing.

  • Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    6y

    Loved the breakdown, good first one Have you been continuing to BRRR?

  • Sean RooksPro Member
    OP
    Rental Property Investor · High Point, NC · Member since 2017 · 272 posts · 304 votes
    6y

    @Caleb Brown Yes... currently rehabbing a 6-plex, should refi in about 9 months.

  • Specialist · Plano, TX · Member since 2020 · 2k+ posts · 861 votes
    6y

    Awesome work and congratulations on this success. 

  • Rental Property Investor · Cambridge, UK · Member since 2020 · 203 posts · 95 votes
    6y

    @Sean Rooks well done! Thanks for sharing. The first one is always a learning experience. It's great to see that you didn't let it bring you down and that you are already on to the next one! Wishing you the best!

Join the conversationCreate a free account to reply, vote on answers and follow this thread.