Monster 3 unit BRRRR complete!

Monster 3 unit BRRRR complete!

Rental Property Investor · Hummelstown, PA · Member since 2015 · 638 posts · 653 votes

I completed 4 single family BRRRR's last year, and this year I was ready to take the next step to complete a multifamily BRRRR. This deal was listed on the MLS but was not on my radar until @Travis Wylie texted me the listing.  It IMMEDIATELY got my attention and I was under contract about 24 hours later.  It was listed for $100k and I got it for $85k cash.

The property was a probate property.  It was originally a 3 unit (I converted it back to a 3 unit) and had been in the family since 1946 (and they hadn't done much updating at all!).  It's huge - over 3,000 sq. ft. and each unit is 2 bed, 1 bath, plus there's 2 garage bays.  It's in a fantastic location in arguably one of the hottest rental markets in the Harrisburg, PA area.

I was able to close in cash with some HELOC's and cash leftover from my 2018 BRRRR's. Then I was able to raise the rehab funds using a secured time note from a commercial lender, private loans from friends/family, and a business LOC.

I re-did my analysis on this property literally about 20 times while renovations were ongoing. I ended up putting in A LOT more in renovations than anticipated, but the ARV ended up coming in much higher which compensated for it. I also ended up getting much higher rent than anticipated. This place is going to cash flow like crazy!

Renovations included the following:

•Previously one electrical meter and panel box, installed 4 new meters and 4 new panel boxes, complete rewire of entire building
•New outlets, switches, and light fixtures
•Repaired foundation
•Split gas into 3 meters
•Brand new ductwork, furnaces, and Central AC for Units A & B
•New gutters & downspouts
•Roof, flashing repaired
•Trees around house removed
•Entire exterior painted
•30 windows replaced

•2 new water heaters
•Replaced about 75% of plumbing
•Cleaned out garages, installed divider, and installed new garage doors
•All 3 units:
• New floor & paint, drywall repair
• New kitchen cabinets, counters, appliances
• New toilet, shower/tub, vanity

Purchase price: $85,000

Renovations: $175,000

All-in, including closing & holding costs: $270k

Appraised at $306,000

80% LTV cash out refi (cash back after fees): $236k

So I'm left with about $34k in the deal.  I was able to rent out the units for 1100 (including 1 garage bay), 1000, and 900.  Plus one garage still needs to be rented.  So, gross rents will be over $3,000/month.

After paying PITI, maintenance, management, utilities, and Cap Ex/vacancy allowance I'm cash flowing about $500/month.

This deal was about as big as I could handle - I ALMOST bit off more than I could chew - but I got through it, made a ton of mistakes and learned a ton! I scared a few contractors away, and had to fire another one, but the ones who made it through ended up proving they can handle a big, (relatively) complex project.  We had electrical, HVAC, painters, garage door specialists, and general laborers/handymen on the project, and some days they were all there at once.

The biggest two things I learned were how to better estimate rehabs (this will be an ongoing education) and also how to better estimate ARV on a 2-4 unit property.

Pics below!

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Most Popular Reply

Rental Property Investor · Member since 2019 · 187 posts · 230 votes
7y

Congrats @Kyle McCorkel, looks great!  Do you know what product was used to refinish the shower tile and bathtub?

See this reply in the discussion

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  • Rental Property Investor · Hummelstown, PA · Member since 2015 · 638 posts · 653 votes
    7y
    Originally posted by @Shaun Weekes:

    @Kyle M.

    Great job, who did you use to get 80% cash out on a 3 unit investment property? Also, what type of rate and terms did you secure if you don't mind me asking?

     In the interest of not bombarding the lender with emails, I'm not posting their name on public forum.  I am gladly sharing their name to anyone who PM's me.  They are a regional bank (but as far as I know they only do this in Central PA) and I found them by asking around on Bigger Pockets!

    4.25% fixed for 10 years, then adjustable. 30 year amortization. No seasoning period. They lend to LLC's. 80% LTV.

  • Ellis PierrePro Member
    Gaithersburg, MD · Member since 2017 · 1 post · 0 votes
    7y

    Great job Kyle. Your positive mindset kept you going through the tough times. I'm glad things worked out nicely. Pictures looks great.

  • Lender · Charlotte, NC · Member since 2019 · 59 posts · 60 votes
    7y

    This is very inspiring. Thank you for sharing.

  • Lender · PA · Member since 2019 · 2 posts · 0 votes
    7y

    Awesome job Kyle!  You really cleaned the property up and gave it an opportunity to flourish in this market. Keep acquiring the properties that make the most sense with your overall goal and your portfolio will do great. 

  • Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    7y

    Wow that's a great deal! More good ones to come hopefully!

  • Member since 2018 · 1 post · 0 votes
    7y

    What a great story. Thank you for sharing!

  • Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
    7y

    @Kyle McCorkel

    Did you refinish that bath or is that a new bath all together?

  • Rental Property Investor · Hummelstown, PA · Member since 2015 · 638 posts · 653 votes
    7y
    Originally posted by @Luka Milicevic:

    @Kyle McCorkel

    Did you refinish that bath or is that a new bath all together?

     In that picture, I refinished the tile, and put in a new toilet and vanity.

    Most of the kitchens/baths were entirely new.

  • Belfast, Northern Ireland · Member since 2018 · 128 posts · 56 votes
    7y

    @Kyle M.

    Wow. Looks really great. Bet it’s even more satisfying when the money comes in every month.

  • Greensburg, KS · Member since 2019 · 24 posts · 1 vote
    7y

    @Kyle M. Way to go Kyle! That’s fantastic brother. Keep going!

  • Investor · Ponte Vedra, FL · Member since 2017 · 38 posts · 17 votes
    7y

    @Kyle McCorkel the rehab looks great! I'm just about to start on my 2nd BRRRR property and struggling with the appraisal portion. The comps for my house are anywhere from $70-120/sf, so I'm trying to keep my estimate for the ARV on the lower end. I see that you still had $34k in the deal. How do you plan on paying that balance off? Do you still consider it successful when you have money left in the deal (you do have nice cashflow!)? I have been reading the BP book about BRRRR and @David Greene usually gets all of his money back. I'm still trying to wrap my head around that one. The project I'm working on will have about $7-10k left in the deal and I'm thinking of doing a refi on another property to get the equity to pay off the balance. I'll be carrying that $7-10K balance on my HELOC until I can pay it off. Would love your thoughts! Thank you!

  • Member since 2019 · 4 posts · 6 votes
    7y

    How long did your project take to complete - start of construction to completion? You mentioned 'scaring off' a few contractors, so I would imagine that delayed things a bit.

    I'm about to start a brrrr of nearly your same size and rehab level. It's my first purchase ever, so I'm trying to mentally prepare how much Tylenol I'll need lol.

  • Lacey, WA · Member since 2013 · 52 posts · 4 votes
    7y

    Looks fantastic and the numbers look fantastic.  Congratulations!  The tree removal was such a good idea, and relatively simple.

  • Charlotte NC · Member since 2019 · 1 post · 0 votes
    7y

    @Kyle M.

    Congrats! Looks great. Quick question- what is the

    ‘Cap Ex/vacancy’ cost that you listed as one of your payments? Thx!

  • Specialist · Cleveland, OH · Member since 2018 · 39 posts · 5 votes
    7y

    Great job! I have the same strategy im beginning at the top of next year.

  • Lender · South Setauket, NY · Member since 2017 · 2 posts · 1 vote
    7y

    Congrats nice job! Admitting to mistakes and learning from them is something i need to work on lol.

    The multi family cash flow is awesome no doubt.

  • Investor · springfield, MA · Member since 2011 · 98 posts · 16 votes
    7y

    @S L Martinez who are financing with that offers 100% of purchase and construction? Thank you

  • Rental Property Investor · Hummelstown, PA · Member since 2015 · 638 posts · 653 votes
    7y
    Originally posted by @Noah Mccurley:

    @Kyle M.

    Wow. Looks really great. Bet it’s even more satisfying when the money comes in every month.

    That is TOTALLY the most satisfying part!

  • Rental Property Investor · Hummelstown, PA · Member since 2015 · 638 posts · 653 votes
    7y
    Originally posted by @Kirsten Braddock:

    @Kyle McCorkel the rehab looks great! I'm just about to start on my 2nd BRRRR property and struggling with the appraisal portion. The comps for my house are anywhere from $70-120/sf, so I'm trying to keep my estimate for the ARV on the lower end. I see that you still had $34k in the deal. How do you plan on paying that balance off? Do you still consider it successful when you have money left in the deal (you do have nice cashflow!)? I have been reading the BP book about BRRRR and @David Greene usually gets all of his money back. I'm still trying to wrap my head around that one. The project I'm working on will have about $7-10k left in the deal and I'm thinking of doing a refi on another property to get the equity to pay off the balance. I'll be carrying that $7-10K balance on my HELOC until I can pay it off. Would love your thoughts! Thank you!

    I never finance the entire purchase and rehab costs.  I always try to put a significant amount of my own cold hard cash in the deal.  In this case I put in about $70k of my own cash then used private money and lines of credit for the rest.  The $70k acts as a buffer - if everything goes wrong (low appraisal, high rehab costs, can't refi immediately, etc.) then I feel I can still pay back my private lenders.  So worst case I don't get some of my own money back.  I NEVER want to be in a situation where my private lenders don't get their money back.

    My preference and target is always to get all of my money back, but it just doesn't always work out that way.

  • Rental Property Investor · Hummelstown, PA · Member since 2015 · 638 posts · 653 votes
    7y
    Originally posted by @Michelle Tresino:

    @Kyle M.

    Congrats! Looks great. Quick question- what is the

    ‘Cap Ex/vacancy’ cost that you listed as one of your payments? Thx!

    Cap Ex is capital expenditures.  Since I replaced most of the HVAC, plumbing, electric, etc.  I used $100/month for this.  This is in addition to maintenance costs, which I use 5% of gross rents.  This is a common benchmark but I have actual data from the rest of my portfolio to back it up.

    Vacancy - accounts for when a unit is not rented.  For multi-family properties (and smaller, cheaper units) I use 5%.  For single family, I use 1/12 (which I think works out to 7.8% or something like that).  Again, I have real data to back up those assumptions.

  • Property Manager · Indianapolis, IN · Member since 2019 · 31 posts · 21 votes
    7y

    @Kyle M. This was so exciting to read! Congrats on pulling through!

  • Rental Property Investor · Ottawa, ON · Member since 2019 · 1 post · 0 votes
    7y

    @Kyle M. Super job on the flip!

  • Member since 2018 · 16 posts · 4 votes
    7y

    Thank you for taking the time to educate us with your experience, Kyle. Your answers to the follow-on questions are super-helpful as I strategize my first house hack in the KC Metro. Is it possible to get your eval list for estimating rehab costs? Continued success to you!

  • Kristian LundPro Member
    Charlotte, NC · Member since 2018 · 5 posts · 2 votes
    7y

    Amazing, congrats on a job well done Kyle! Hopefully this inspires you to do it over and over again :)

    Quick question: what was the time horizon on this? From bid, to close, to rehab, to rent, to refinance?

    Thanks,

    Kristian

  • Cleveland · Member since 2019 · 15 posts · 12 votes
    7y

    Stunning great job and thank you for sharing! 

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