BRRRR with Seller finance & Private Money = Infinite return

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BRRRR with Seller finance & Private Money = Infinite return

Rickey RodriguezPro Member
Investor · Port Saint Lucie, FL · Member since 2016 · 45 posts · 6 votes

Investment Info:

Single-family residence private money loan investment.

Purchase price: $70,000
Cash invested: $20,000

This was my first investment property which I acquired via several strategies. I utilized seller finance, private money, and the BRRRR method.

Initial purchase price: $70,000
Seller note amount: $50,000 x 3.5% interest only = 145.83/mth
Down payment: $20,000
Private note: $20,000 x 7% interest only = 116.67/mth
Rehab costs: $15,000 - My own money

The Private note was used for the $20,000 down payment. BRRRR'd in 6 mth for an infinite return

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

Cash flow and the potential appreciation

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

I already had a previous relationship with the owner. I knew there was motivation to sell. We eventually worked out a deal that was a win-win for us both.

How did you finance this deal?

Initially, I used private money and seller finance. I eventually refinanced into a conventional loan.
Be sure to use a title company or lawyer to draft Promissory Notes and file the mortgage security docs with the local county to protect your investors.

How did you add value to the deal?

I updated the property to include new flooring throughout the home. Interior/exterior paint. Window treatments throughout. Updated two bathrooms. Fix a few plumbing issues. Moved one wall to open up the living room. Added landscaping, painted driveway.

What was the outcome?

The property was eventually refinanced. The initial ARV was $130,000. At a 70% LTV, I was able to get a $91k loan which allowed me to pay off the $50k seller finance note and the $20k private note plus recoup my $15k for the rehab costs and put $6K in my pockets.
$91k - $50k - $20k - $15k = $6k and an infinite return.
The property is now worth $200,000.

Lessons learned? Challenges?

Renovations always cost more than anticipated. I also learned about the Seasoning period, 6 months typically. Don't forget to factor this into your numbers and your overall plan.

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

I did not work with an agent. I did work with a great title company. Holden Title in Stuart, Fl. John and Suzanne are awesome individuals. I try to use them for all my deals --- my personal investment deals and when I'm representing my clients as a Realtor.

Holden Title & Escrow
850 NW Federal Hwy, Stuart, FL 34994
Phone: (772) 261-8565

If you do use them, please tell them that I sent you. Suzanne will get a kick out of that!

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  • Zachary Beach
    Specialist · Los Angeles, CA · Member since 2018 · 291 posts · 231 votes
    5y

    @Rickey Rodriguez awesome job and congrats I also love a fully cash out+ brrrr. I will say that the infinite return on investment is not really true because you invested both time and 15Kish if I remember correctly. that being said 1,000% return on investment sounds just as cool. Keep crushing it!

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  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    5y
    Originally posted by @Zachary Beach:

    @Rickey Rodriguez awesome job and congrats I also love a fully cash out+ brrrr. I will say that the infinite return on investment is not really true because you invested both time and 15Kish if I remember correctly. that being said 1,000% return on investment sounds just as cool. Keep crushing it!

    Ok, he didn't get his time back, but, did get all his $15k back, plus an extra $6k out of thin air.  It's the positive cash flow of $1/m or more, for zero dollars remaining out of his own pocket, that makes it "infinite returns".  

    @Rickey Rodriguez, you are getting positive cash flow per month, right?  Cheers...

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  • Zachary Beach
    Specialist · Los Angeles, CA · Member since 2018 · 291 posts · 231 votes
    5y

    @Brent Coombs he got a return of investment of 15K in 6 months plus return on investment of a few hundred percent both of which are awesome so only praise from me in regards to the deal. If I bought a 100k worth of a REIT with a 5% divided and two weeks later it went up 10% and I cashed out 100k and left 10k. Did I just make an infinite return on investment? No I got my money back and still have an asset. Is that still a great deal and are we just talk  semantic yes but real estate is finite and so can you even have infinite in a finite? Even if it's possible it would only be possible if you never had any money of your own even gas from a car or extra cost of food or a plastic bag to bring your lunch and then it would only be a theoretical infinite based on money with no consideration for time yours or someone else's. If a place profited a million dollars in your lifetime and you spend 1 hour working on it and no money you got paid a million dollars an hour not really an infinite return. In this particular case you would say 15K plus cashflow minus expenses including appreciation pay down and tax benefits so at 75K profit at 6 months you could claim the profit to that point as being 1,000% based on a year and then you could choose to compare return on equity at that point which is what I do for my projects or you could keep counting the return compared to the money put down. I have done multiple deals like this and find the real return to be helpful not I got my money back so it's infinite. Wait 30 years and refi and almost every place will be infinite. Knowing this return was 1,000% and this return was 50% based on a year can be a big help not two years later claiming infinite returns. Every active deal I have done has had at least 400% return but some are better than others by a large margin and putting them all into the infinite return category which they also all fit into within a year is not helpful for improving and grow to be the best investor I can be.

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  • Rickey RodriguezPro Member
    OP
    Investor · Port Saint Lucie, FL · Member since 2016 · 45 posts · 6 votes
    5y

    Thank you both for chiming in. I appreciate your perspectives and encouragement. 

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  • Dmitriy Fomichenko
    Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    5y

    @Rickey Rodriguez congratulations on this investment!

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  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    5y

    @Zachary Beach, you wrote "If a place profited a million dollars in your lifetime and you spend 1 hour working on it and no money you got paid a million dollars an hour not really an infinite return", but I beg to differ.  I already conceded that "infinite returns" don't account for the "hour" or more time you took in securing those returns.  It's the no money you have left in each deal to get those returns that make them "infinite".  

    ie. There are infinite numerical fractions between zero and any positive number.

    Yes, it's fine to be ambitious to double / triple / quadruple your ongoing returns to make you a "best investor", but, if you're already getting those returns from Other People's Money rather than your own money, then I repeat: those returns are already infinite!

    Don't try to overthink it.  Congrats on your success so far, and much more to come...

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