FIRST BRRRR PROPERTY! COME JOIN THE RIDE!

FIRST BRRRR PROPERTY! COME JOIN THE RIDE!

Rental Property Investor · Turlock, CA · Member since 2018 · 226 posts · 147 votes

Hello BP members! I wanted to share with you my latest RE project. This is our 3rd RE transaction since jumping into RE in December of last year. First deal was a buy and hold 4 plex, then a flip which we are listing this week, and last month we purchased this SFH. It is a 1/1 home with 480 sq. ft.

I found this house through my daily Redfin emails. Home was listed for 50k with only a picture of the front of the home.I have learned when there is no interior pics it usually means its in bad shape. Since this was such a low price I knew it would not last. Its located in a C area but my initial thought was to turn this into a short term rental. 

We put an all cash offer of 56 with no contingencies and 500 earnest money. The worst that could happen is backing out and losing the 500 since I had no contingencies to negotiate with the seller. I asked my agent what he thought this place may go for fixed up and he mentioned 80-100K so it was too good to pass up. Just coming to the end of our first flip on a 1400 sq ft home I figured a complete rehab on a place this small would be 15K max with me doing a lot of the work. Ended up having two of us getting countered but we came out on top due to response rate to seller agent and we opened escrow. I drove to the property several days later and crawled under and over it. Everything looked good, and good bones! A lot of mice/rat activity in the home as well. Needed complete remodel on the inside though. Closed on it April 12.

The house sits on a 6750 sq ft lot! It is huge. Could fit another house on the property. Previous tenants turned it into a farming/greenhouse/animal raising operation. Went down last week for 3 days and raised hell with the place. In 12 hours I had the inside completely demoed and ready to start the rehab process. I started washing walls with TSP to get ready for primer and paint on day 2. Day 3 I hired 4 guys from Home Depot parking lot to help clean up the back yard. I hauled off 5 large dump trailers of garbage to the dump. There is most like still 1 trailer left of trash buried in the back yard. Pretty crazy.

Goal for this house is to use the BRRRR method, I may not get all my money back out and that's ok for me. Even if 10K stays in the deal I got a house for 10K out of pocket that's all fixed up. Rent should be between 700-800 when complete. I had 3 people stop and ask if it was for rent while I was working on it so I know people are looking. Since this is a rougher area in town I don't want to hold forever, plan is to hold for 2 years and 1031 into something bigger. Also, the lot is huge, its zoned R1 but I plan on reaching out to the city to see if they would allow it to be rezoned for multi. Contractor mentioned I should think about putting a small modular home in the back and double the rent if I can. Not a bad idea.

Anyways, check out the pictures and join me on my first BRRRR!

Listing Picture

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Member since 2019 · 13 posts · 17 votes
7y

@Kevin Moules it’s funny your mention it I live in Texas! 

I'm working on making an offer today actually. I was just on FaceTime with my realtor because the place is an hour away and I didn't want to take time away from work to see every single house. I have read a few books on investing. Currently devouring the BRRRR book and I'm going to start on the book on property management next. The place I'm looking to buy is close to an Army base and it's a 4plex. For my first deal I'm looking to house hack because my lease is up in 2 months and I feel ready to get involved after spending a few months analyzing different markets close to me.

The place I’m looking at is great, fully rented, little to no repairs, wish me luck on my offer!

I know a few wholesalers sent me off market deals today for Houston, Dallas, and Fort Worth areas. I’m pretty comfortable running the numbers in those areas as well as Killeen, FT. Hood and Waco. If you want to, shoot me a PM with what kind of numbers you’re looking for. For me, I’ve seen some good deals but didn’t have the confidence or knowledge to move forward until now. Property taxes aren’t cheap but the rents I’m coming across are pretty strong.

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  • Virtual Assistant · Port Angeles, WA · Member since 2018 · 24 posts · 11 votes
    7y

    Amazing!!! Definitely an inspiration. 

  • Rental Property Investor · Turlock, CA · Member since 2018 · 226 posts · 147 votes
    7y

    @Victor S., thanks for following along on the journey! I do need to find a rockstar lender, especially now that I am self employed with no w-2 income and my wife stays at home with the kids. Thank you for the recommendation! I will have to see if they are in my area.

    @Annalisa Brown, thank you!

  • Rental Property Investor · Turlock, CA · Member since 2018 · 226 posts · 147 votes
    6y

    6 month seasoning finally over on the 12th! Thank God! Will be starting the Refi process paperwork this week. Have my eye on another place but don't want to make an offer until get money back from this one. 

  • WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    Time flies... were you able to find a good lender?

  • Derrick LindPro Member
    Rental Property Investor · Hayward, CA · Member since 2019 · 31 posts · 11 votes
    6y

    @Kevin Moules. What an amazing story. Thx for doing that. The pictures and changes are great to see and hear you ups and downs. Best of luck on future endeavors.

  • Rental Property Investor · Turlock, CA · Member since 2018 · 226 posts · 147 votes
    6y

    @Victor S., I reached out to two lenders in my area. Both from national small lenders that I had not heard of. This is will be a conventional loan so they are still looking at personal finances. Should be a monthly payment of 560 all said and done. Ill share numbers once I close up in 3 weeks time, God willing. Hopefully only leave about 5k in the deal.

    @Derrick Lind, Thanks for reading through the thread, glad you enjoyed it. I see you are from the golden state. Are you investing around Castro Valley?

  • Derrick LindPro Member
    Rental Property Investor · Hayward, CA · Member since 2019 · 31 posts · 11 votes
    6y

    Yeah.... no.  Last house I bought in California brought the whole economy down.  My primary in 2005.  lol.

    Bay Area is just too pricey, too much competition, and no cash flow.  I want to cash flow for a buy/hold.  Returns are decent if the appreciation holds up, but not sure on that front.  And you'd be negative cash flow to boot.

    I'm looking OOS, but not sure what market yet.  I did see a few small MFs in Turlock though that looked interesting, but I'm not quite ready for that yet.  Maybe in a few years.

    Again... great posting.  Love to see those updated/final numbers when you get closed up.

  • Jo-Ann LapinPro Member
    Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
    6y

    Thanks for the post . Kudos to you . Looks great .

  • Andre TaylorPro Member
    Rental Property Investor · Chicago, IL · Member since 2017 · 219 posts · 180 votes
    6y
    Great Job Kevin!!! I enjoy following your journey. I am will be starting on my first rehab next month and I will do just what you did in sharing the story. Cant wait to hear what the house appraise for. I am about to read on your first flip.
  • Rental Property Investor · Turlock, CA · Member since 2018 · 226 posts · 147 votes
    6y

    @Derrick Lind, I would highly recommend listening to The Real Dealz podcast number 265 with Neal Bawa I believe is his name. He makes choosing a market pretty easy based on actual data. I created a spreadsheet for myself as I look out as state and look at markets. 

    thank you @Jo-Ann Lapin and @Andre Taylor! Andre thats awesome to hear! I highly encourage you to start a thread to document your journey on your first rehab. Share your successes and your short comings. As Mr.Gates famously stated, "Success is a terrible teacher". Please let me know when you start it as I would like follow along!

  • Rental Property Investor · Turlock, CA · Member since 2018 · 226 posts · 147 votes
    6y

    Appraisal is complete!! Finally had a walk through last week. Final appraisal number came in at $106K! I was hoping for 110 but new that would be a stretch and that 105 was more realistic. Super happy with this number and will be pulling out 75K. Unfortunately after paying closing costs and a a dump trailer loan which they forced me to pay off due to debt to income ratio only about 66K will show up in my account. Really nothing to complain about! I can see how this strategy can be so POWERFUL! About 2K will be going to pay off Lowes bill that i have had 0% interest on until january. I purchased most of the materials for the house from Lowes. About 10K will go back to repay my HELOC account so I can stop paying interest. The rest of it will hopefully be used to purchase either and OOS rental or fund a flip property in my area.

    Thanks @David Greene for writing the BRRRR book! I definitely used knowledge gained from it on this first deal. I am actually re-reading it at the moment.

    Once the REFI is completed I will share final numbers here. For now just enjoying the small cash flow its making. 

    Thank you!

  • Lender · Turlock, CA · Member since 2015 · 46 posts · 33 votes
    6y

    Great work Kevin! Super proud and happy that you will be officially "BRRRing" this property successfully in our neck of the woods!

    Just to touch base and clarify on the Fannie guide: Most think you aren't able to do a cash out refinance before the 6 month seasoning at all. In actuality, you can start the cash out refinance 1 day after closing on the cash purchase but that is when you are capped on the new loan amount to be no greater than the purchase price + closing costs. This is called the Fannie Mae 'delayed financing exception.' This is especially lucrative for some investors who don't want to wait the 6 months and just want to pull out their initial investment right after purchase so that they may continue to buy without waiting. However, after the 6 month seasoning is up, the sky is the limit and you are able to pull 75% of the appraised value!

    Looking forward to seeing you knock out more projects & best of luck!

  • Flipper/Rehabber · New Orleans, LA · Member since 2015 · 36 posts · 22 votes
    6y

    @Kevin Moules, property is coming along pretty good. In one of your responses you mentioned that a contractor already bid $10k to do some work. Exactly what does this contractor plan to do for $10k?

    On my first property, I assumed $25k would work and ended up paying $50k and didn't even remodel the whole house! I may have been taken advantage of though. Only got 2 bids. First contractor didn't even give me a quote; he was trying to wing it as he go along. Didn't use him obviously.

  • Rental Property Investor · Turlock, CA · Member since 2018 · 226 posts · 147 votes
    6y

    @Andrew Narsi, thanks for all your help man and support. Trying to be big time like you! :) Thanks for the clarification for those who will be reading through this thread. Totally understand the delayed financing option as it allows your purchase money to be pulled out immediately and recycled. You will just have to leave the rehab cost in the property. However I guess another strategy would be to wait a year or so and do another cash our refi to pull out the refi cost!

    @Nicole Parnell, not sure if you started from the beginning but the home is complete now. I had 2 contractors bid around 10K and one was 30K over the phone. He obviously was not interested. When you say you assumed 25K, was that your initial thought before purchasing the property? How did you come up with that number? Once you had the contractor give you an estimate for your scope of work is that when he came up with 50K? You may not have been taken advantage of, maybe you were off on your own initial estimate? Estimating rehab is not easy, thats why investors get contractors in the home during the escrow stage to get an idea of what it will cost. If its much more than they thought they will back out of the deal or try to negotiate the price down.

    For 10K, mind you this is for labor only as he did not buy materials. Remodel bathroom, remodel kitchen, install flooring throughout home, dry rot siding work. Other misc repairs as they came up in the process. 

  • Flipper/Rehabber · New Orleans, LA · Member since 2015 · 36 posts · 22 votes
    6y

    @kevinmoules, yep. Sorry about that. I read a few post and put in my 2 cents in before reading the entire thread. After I posted, I realized I should have waited but didn't know if there is a way to delete. The entire project came out super awesome! Love it. To answer your questions, I just assumed it would be $25k by looking at the cost of materials at Lowe's. I figured it shouldn't be too much. I was quoted $40k by 2nd contractor. Of course he found problems along the way which ended up costing an extra $10k. He paid for 90% of materials. I see where I would change up a bit on next flip, I want to pay for my all materials next time. 

  • Rental Property Investor · Turlock, CA · Member since 2018 · 226 posts · 147 votes
    6y

    @Nicole Parnell, thanks for the kind words. Looking at just price of materials is one thing, how about cost of labor for contractor and his guys? Also have to think about contractor mark up on materials for the job. These are costs you can only get with an estimate from the contractors. Those unforeseen issues will sneak up on you. I account 10% of rehab estimate for surprises. It may not cover it but at least I have give it a place in my numbers. 

    Paying for materials has pros and cons. All depends what the rest of your life looks like. For the house I flipped earlier this year contractor purchased and picked up probably 95% of these materials. It made my life so easy. He knew what we needed to do and purchased materials needed. On this property I had to purchase all materials, which i saved 5% with my lowes card. However, I had to go sit with kitchen designer for cabinets, I had to call and order materials, then set up pick up times with the contractor. When he needed additional materials he would call me and ask me to purchase them. Although I saved money, it was a pain to do because I was full time with my other business and don'd answer calls when on the job for a customer, typically. So if the rest of your life is flexible and you want to source the materials and purchase do it. 

    The other method which I was trying to get him to do was pick out the items himself and then call me just for the payment at the register. Did not get this dialed in. I did enjoy working with him and if I can find another place I will use him. We have built trust with each other now. He knows I pay when he asks and I know he will do a good job. He may be willing to buy a little more of the materials next go around.

  • Rental Property Investor · Turlock, CA · Member since 2018 · 226 posts · 147 votes
    6y

    It is finished!! Wire transfer came in yesterday. Time to complete the last R, REPEAT. As part of the refi process they had to pay off a loan I had on a dump trailer for my business. Unfortunately this took out 3500 of the payback amount. I was making small payments on the loan but that's ok. Numbers below wont count the 3500 they pulled out. 

    Couple of items I learned during the refi.

    Have tenant pay deposit as one check, and rent on another. Bank wanted to see deposit checks and rent checks. In my case I had the deposit, prorated rent for August as well as full months rent for September all in one check. I asked for this not knowing any better. I had to break down the amounts for them several times. They wanted to track every penny. 

    They wanted to see signed lease agreement, which I had learned they would ask for. 

    For documentation, I found the easiest thing to do for all bank/retirement/credit card statements was to create a google drive folder with all this info. Then, share this folder with the different banks I was working with. Better than trying to email everyone these docs every time.

    Home appraised for $106,000! When I begun the loan process I stated I wanted a loan of 75k because I thought it would appraise at 100K. Once the appraisal came back I am not sure if that would have been the time to ask for an increase of the loan because all expenses and fees were based at 75K loan. I would have gotten another 5K out but another $20/month for the payment. I guess Ill ask that question next go around. 

    So here are the final numbers:

    Purchase/associated fees: $57,122

    Rehab/holding: $23,475

    Total costs: $80,597

    Refi loan/misc credits: $75,172

    Loan/Escrow/Misc. fess: $4,197

    Net Loan Amount: $70,975

    Total Left in Deal: $9,622

    Monthly payment: $498

    Monthly rent: $700 (should be higher and will be increased next year)

    So, I did not get all my money out, but I only left 10K in the deal! To purchase the place in this condition I would have had a down payment of 21K for a purchase of 106k. So i got the house for half that amount out of pocket.
    I see that as a win in my book. Added 31K in equity to my portfolio. I have a completely rehabbed house so cap ex and expenses should be really low if non existent for several years. 

    My plan from the beginning of this purchase is to sell this home in 2 years time with a 1031 exchange. I will either try to get a multi family or a SFH in Fresno, or possibly OOS and shoot for 500/month in cashflow at that time.

    Thank you all for following along my journey. I am going to try and repeat this process again. I actually will be putting in an offer on a property not too far from this one next week that needs a total rehab. If you have questions I would be happy to answer.

    Its been a successful first year in RE i would say. Bought first conventional buy and hold last December (kicking myself for tying up so much on down payment) , completed first flip in June and first BRRR in November. Hoping to double amount of deals next year!

  • Darryl PutnamPro Member
    Investor · Mountain View, CA · Member since 2016 · 40 posts · 25 votes
    6y

    @Kevin Moules great job! This is a win. A successful BRRRR more often than not will leave a little money in the deal. Keep up the good work.

  • Real Estate Agent · FRESNO, CA · Member since 2016 · 60 posts · 42 votes
    6y

    Coming a little late to this party, but what a great job Kevin!

  • Investor · Jacksonville, FL · Member since 2015 · 138 posts · 43 votes
    6y

    This is fantastic! Great job @Kevin Moules  I can't wait to hear about the next one. 

  • Rental Property Investor · Turlock, CA · Member since 2018 · 226 posts · 147 votes
    6y

    @Darryl Putnam, thank you, i need the encouragement! I read your profile, looks like you have been very successful in the world of real estate.  Hoping to get there someday. 

    @Barbie Steele, thank you! I see your are a an agent in Fresno. If you come across run down properties like this that can only be purchased in cash i would love to work with you!

    @Jenell Poncabare, unfortunately all these mls deals i am finding (analyzed two today) for cheap are going for over asking, just like I paid over asking for this one, but the numbers still made sense on this one. They do not make sense on the others. Guess ill have to move to off market deals. 

  • Real Estate Agent · Fresno, CA · Member since 2014 · 367 posts · 174 votes
    6y

    well done @Kevin Moules !

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