First BRRRR deal in Pittsburgh

Real Estate Deal Analysis & Advice
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First BRRRR deal in Pittsburgh

Camden Kelly
Investor · Pittsburgh, PA · Member since 2020 · 23 posts · 34 votes

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $53,000
Cash invested: $36,000

This was my first experience with BRRRR. I secured a line of credit against my primary residence for $85,000. I took the full amount out and purchased a single family home for $53,000 and rehabbed the whole thing top to bottom. This included, plumbing, electrical, a retaining wall, HVAC, flooring, kitchen, bathroom, paint, fixtures, ETC. My total invest in the property, including holding costs, is just north of $88,000. The house recently appraised for $140,000.

What made you interested in investing in this type of deal?

The numbers made sense. I had looked at and analyzed over 50 deals. This one fell into my lap (the seller had reached out to me). I was able to get the property at a premium do to the scope of work (80% of which I could do myself).

How did you find this deal and how did you negotiate it?

My father-in-law is a contractor. He was working on the house across the street when the seller approached him and asked if he wanted to take a look. He called me to let me know it could be a pretty quick turn around (2 months).

How did you finance this deal?

HELOC

How did you add value to the deal?

I updated everything in the house. Although I ended up spending a little more than I had originally wanted to, I feel that the extra money spent allowed me to ask for a little more in rent.

What was the outcome?

Felt like a fairly successful BRRRR. I didn't have to leave any money in the deal and I now have the capital to inject into the next deal.

Lessons learned? Challenges?

Finding the right tenant is a process. We had 75 applications come in when we posted the property. It took an extensive amount of time showing the property, vetting potential tenants, and drafting the lease (thank you BP for the PA lease package!).

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Anjelica Kopsahilis. Would highly recommend her to anyone who is getting started.

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Shai Flax
North Richland Hills, TX · Member since 2019 · 156 posts · 80 votes
5y

@Camden Kelly WOW, amazing numbers!

Was that your first rehab or do you have experiance in this already? How did the rehab cost so little when you updated everything? Was it your sweat equity?

@Jonathan Rudd you might find it interesting...

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  • Jonathan Rudd
    Rental Property Investor · Port Royal, SC · Member since 2018 · 3 posts · 0 votes
    5y

    @Shai Flax oh awesome! Great deal. Thanks for tagging me in this!

    0Reply
  • Uyen Hoang
    Investor · Nashville, TN · Member since 2020 · 4 posts · 0 votes
    5y

    Congrats!! I really like the BRRRR method, and I'm totally new to this. The problem is I don't know anything about fixing houses, do you think it's possible to make profit if I'm 100% depends on contractors?

    0Reply
  • Camden Kelly
    OP
    Investor · Pittsburgh, PA · Member since 2020 · 23 posts · 34 votes
    5y

    @Uyen Hoang Hi, Uyen! Personally, I do believe it’s possible to still turn a profit contracting out 100% of the work on a rehab. In fact, the best way to scale would be to operate this way. Two suggestions: 1.) really familiarize yourself with rehab costs. I would start by reading The Book on Estimating Rehab Costs by Jay Scott. 2.) I would see if a contractor would be willing to walk a property you are interested in with you to walk you through what he/she look for. Finally, I’d always collect multiple bids on specific projects. Costs can vary based on multiple different factors so it’s important to collect multiple bids. If you ever have any question I’d be more than happy to help. Feel free to drop me a message whenever!

    1Reply
  • Jabbar Adesada
    Rental Property Investor · Beaufort, SC · Member since 2020 · 119 posts · 98 votes
    5y

    @Camden Kelly

    Congratulations on moving another step closer to accomplish your goals!

    0Reply
  • Andrew Galambos
    Specialist · Los Angeles · Member since 2019 · 24 posts · 11 votes
    5y

    Awesome,  Could you share what rent your getting and how that compares to your mortgage payment plus prop taxes and other expenses, thanks.

    0Reply
  • Camden Kelly
    OP
    Investor · Pittsburgh, PA · Member since 2020 · 23 posts · 34 votes
    5y

    @Andrew Galambos Hi! Great questions.  I opted to take out a 15 year mortgage as opposed to a 30 year mortgage.  Between the mortgage payment, taxes, repairs, vacancy, utilities I cover, homeowners, ETC my costs are about $900 a month.  The gross rent is $1,200.  By this metric, it cash flows about $300 dollars a month.  If I had opted for a 30 year mortgage it would have cash flowed around $700 dollars a month. I hope this is helpful!

    0Reply
  • RaeShawn Middleton
    Member since 2020 · 1 post · 0 votes
    5y

    @Camden Kelly was your first brrrr experience smooth and easy or extremely challenging? Also if you don't mind me asking,how did you finance your first brrrr?

    0Reply
  • Camden Kelly
    OP
    Investor · Pittsburgh, PA · Member since 2020 · 23 posts · 34 votes
    5y

    @RaeShawn Middleton There were some challenges for sure. Some unexpected costs, timeline setbacks, and stress. However, it went as smooth as possible I believe. I fully funded the deal through a HELOC.

    0Reply
  • Jay Yoo
    Investor · Seattle, WA · Member since 2019 · 139 posts · 54 votes
    5y

    @Camden Kelly

    Thanks for sharing this. Im in the the shoes although Im OOS investor. Expecting more on rehab.

    My question is the last step on Brrrr. When you refi the property with bank and either heloc out to get capital to move on to the next step, Dont you need to pay back the loan? Heloc isn’t free money but it is a loan to pay back.

    How do you plan carefully for your next property knowing that increasing monthly expense ( including heloc) to banks and invest capital for the next one? Can you share some knowledge that I am missing? Thank you

    0Reply
  • Camden Kelly
    OP
    Investor · Pittsburgh, PA · Member since 2020 · 23 posts · 34 votes
    5y

    Hi @Jay Yoo,

    This is an excellent question. As I'm sure investors would answer this differently, here is what I ended up doing to take advantage of historically low rates. After I tapped into the full amount for the HELOC I immediately started the refinance process on my primary residence. I paid a couple points and was able to get a 2.35% interest rate while consolidating the HELOC and my primary mortgage into one lien. Capitalizing on the low interest rates, my monthly payment went from $1,307 a month to $1,550.

    After the project was finished I start a cash out refinance, through the same bank, on the rental property.  The monthly costs of this property are about $900 a month (read my response to another BP member above) and it yields $1,200 a month in rents. In turn my results were as follows:

    - An increased total amount due on my primary mortgage with an increased monthly payment of about $250 dollars

    - $105,000 dollars readily available for my next deal

    - $300 dollars in passive income each month

    When you break down the numbers, essentially, the passive income from the real estate transaction covers the difference on my mortgage and I also have some money available for my next deal. I'd be happy to talk about this further if you ever want to connect.  There would be too much to detail in a single post. These are just some surface level numbers. 

    0Reply
  • Kevin PruittPro Member
    Rental Property Investor · Stow, OH · Member since 2016 · 28 posts · 17 votes
    5y

    @Camden Kelly did you net $105k from the refi? Or were there no closing costs associated with your refi since you did it with the bank you have all your other stuff? Thanks!

    0Reply
  • Camden Kelly
    OP
    Investor · Pittsburgh, PA · Member since 2020 · 23 posts · 34 votes
    5y

    @Kevin Pruitt Another excellent point! I would have to go back and look at my CD, but I believe I had around $4,000 in closing costs for title and the appraisal.  Thank you for asking!

    0Reply
  • Michael Leahy
    Real Estate Agent · Santa Rosa Beach, FL · Member since 2020 · 12 posts · 6 votes
    5y

    Congrats on a well executed BRRRR! What would you say are the biggest lessons you took away from your experience?

    0Reply
  • Camden Kelly
    OP
    Investor · Pittsburgh, PA · Member since 2020 · 23 posts · 34 votes
    5y

    @Michael Leahy That's an excellent question! While I feel like finding deals, negotiating, and managing a rehab are some of my greatest strengths, I want to learn more about property management. After this BRRRR I felt that getting the right tenant in there was the most important part. I didn't realize how hard it would be to find a tenant that met my standards, even with all of the applications, in a class B/C neighborhood. Patience is key!

    1Reply
  • Blake Dailey
    Investor · Ogden, UT · Member since 2018 · 295 posts · 208 votes
    5y

    @Camden Kelly sounds like a great deal, congrats! If you are going to manage yourself, definitely read @Brandon Turner's yellow book on managing rental properties!

    0Reply
  • Camden Kelly
    OP
    Investor · Pittsburgh, PA · Member since 2020 · 23 posts · 34 votes
    5y

    @Blake Dailey Thank you for the suggestion! I’ll definitely add it to my list.

    0Reply
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