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?

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  • Member since 2019 · 13 posts · 21 votes
    7y

    Hey,

    You mentioned that you had to fix the foundation? Just curious what was wrong with it, and was it a big part of the renovation budget? I am currently looking at a multifamily with foundation issues. Some people say not to touch them and they scare some away but it could be an opportunity for someone that is willing to do the work.

    Thanks.

  • Lender · Greenville, SC · Member since 2017 · 26 posts · 4 votes
    7y

    That's great Kyle! Congratulations. 

  • Flipper/Rehabber · Houston, TX · Member since 2019 · 42 posts · 20 votes
    7y

    Awesome BRRRR story! Great work Kyle!

  • Specialist · Wesley Hills, NY · Member since 2018 · 20 posts · 10 votes
    7y

    I've seen people have been asking how to find a solid BRRRR... I suggest try getting cold callers and ones that will work consistently every day and you'll get all the BRRRRs you can handle.

  • Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
    7y

    Well done you fixed the mechanical correctly most flippers cobble mechanical together just enough to pass inspection.

  • Gina SternPro Member
    Investor · Boca Raton, FL · Member since 2019 · 1k+ posts · 159 votes
    7y

    @Kyle McCorkel good job love reading stories like these. Keep hustling hard man!!!

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

    Hey,

    You mentioned that you had to fix the foundation? Just curious what was wrong with it, and was it a big part of the renovation budget? I am currently looking at a multifamily with foundation issues. Some people say not to touch them and they scare some away but it could be an opportunity for someone that is willing to do the work.

    Thanks.

    There was one section of the foundation that was badly buckled due to a tree growing right next to the property.  It only affected one part of the building.  I removed the tree and had a foundation company come in to fix the damage.  What they recommended was carbon straps.  It ended up costing about $3k.  It definitely doesn't look pretty but they gave me a lifetime guarantee and I'm comfortable with safety and all that.  Plus, it is in an unfinished basement, in a section that I don't allow anyone access to.

  • Member since 2018 · 8 posts · 2 votes
    7y

    Congratulatuons @kyle M. looks very nice.  I am neck deep in complex reno also which has lasted a year and counting so the story sounds familiar with contractors.  i am learning alot though.

  • Rental Property Investor · Wormleysburg, PA · Member since 2018 · 20 posts · 16 votes
    7y

    This looks great! Congrats! I drove by it the other day and it looks fantastic.  I also used the portfolio lender that @Kyle McCorkel suggested. I got the 80% on my last BRRRR also and they are already helping with another one. Keep up the great work and thanks for all the helpful info you always give!

  • Rental Property Investor · Peekskill, NY · Member since 2019 · 31 posts · 11 votes
    7y

    @Kyle McCorkel nice recovery and great job despite the challenges.  Continued success on the next one :) 

  • Investor · Seattle, WA · Member since 2019 · 2 posts · 0 votes
    7y

    Inspiring story! Congrats, and thanks for sharing! After reading the story and all the posts, I got the impression that it's probably a good idea to start off doing a few single family deals, and build good relationship with lenders from there before getting bigger projects that requires to set up a LLC and get loans through LLC.

    Wish you continued success on the next ones!

  • Wholesaler · Philadelphia, PA · Member since 2016 · 124 posts · 81 votes
    7y

    @Kyle McCorkel Amazing! Question - as you were revising your numbers during reno, in your calculations, did you project the ARV and rents you ended up receiving or were you just riding on a leap of faith? You mentioned that estimating rehab cost and ARV were your biggest takeaways from the project so I'm guessing you went with the "leap of faith?" strategy. lol

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

    @Kyle McCorkel Amazing! Question - as you were revising your numbers during reno, in your calculations, did you project the ARV and rents you ended up receiving or were you just riding on a leap of faith? You mentioned that estimating rehab cost and ARV were your biggest takeaways from the project so I'm guessing you went with the "leap of faith?" strategy. lol

     I suppose it was a bit of a leap of faith.  But I would argue that it's always a leap of faith, in a way.

  • Member since 2019 · 8 posts · 1 vote
    7y
  • Roni E.Pro Member
    Specialist · Earth 2.0 · Member since 2019 · 598 posts · 271 votes
    7y

    Great JOB! I would just take into account your largest item, your time. Would it be better served to go with a different method. Or do these type of deals and sell them to investor who wants the cash flow. 

  • Jaye ClarkPro Member
    Member since 2019 · 1 post · 0 votes
    7y

    Congrats Kyle!!! You did a outstanding job!

  • Newbury Park, CA · Member since 2015 · 157 posts · 121 votes
    7y

    Great work! Just one question. Why didn't you leave the H in the shower? hahahah

  • Contractor · Canton, GA · Member since 2015 · 107 posts · 81 votes
    7y

    @Kyle McCorkel I admire your pain with taking on a renovation project such as this.You, apparently ,were given an avalanche of opportunities to create a place of pride and long term hold if you choose. My build out is no where near yours ,but with no luck a tree will go through it and I will get to cash flow with the insurance company.

    In June , I purchased a triplex. All 3 units need heavy repairs and change outs. Im going through (hopefully ) the worst one. Originally, spent some money on due diligence for a bug man and an inspector to look over the place. Even though I'm a contractor, I like a second set of eyes on the place to see if I was blinded by my "want" of the property. A bit of advice to newbies, Check out beyond the home. Landscape, Septics, overgrowth, water run off areas, power easements, and of course the adjoining properties. When your property is over 1 acre , many things can grow up and eat away at budgets.

    This complex was bought with a Heloc and with 2 units already lived in cash flowing, They will cover the payments, insurance, taxes and overhead of a property management company and most of the repairs on the first unit for the first year. After going through the first one, I know how the next 2 will be rebuilt, by another contractor. 

    AT 105 miles one way commute to this project, it's motivated me to look into local help. I now have to calculate my man hours  for this unit. I'm sure it will be about min.wage(not 15$/hr) when after looking at comparisons for the next 2 units.

  • Member since 2019 · 14 posts · 3 votes
    6y
    This is incredible and love the success story. im just waiting for my time to get to jump into something like this. im glad it all worked out and the property looks amazing!
  • Lender · Newark, NJ · Member since 2016 · 695 posts · 252 votes
    6y

    awesome, congrats.keep up the good work

  • New to Real Estate · Frisco, TX · Member since 2017 · 8 posts · 2 votes
    6y

    Love this deal. I'm interested on if you would recommend getting the shower tiles painted like that - we've got an ugly shower in a home and I'm looking for options other than replacing tile. 

  • Real Estate Agent · San Antonio, TX · Member since 2019 · 21 posts · 13 votes
    6y

    I love it!

  • Member since 2021 · 21 posts · 14 votes
    5y

    @Kyle McCorkel great job! Do you have any contractor references? I will be starting a rehab in October in Mechanicsburg and would love some recommendations

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