All Forum Posts by: Austin Fruechting

Originally posted by @Brian Garrett:

@Austin Fruechting So you are doing BRRRR with this property correct? Not standard rehab and flip? I saw you mentioned renters and then eventually selling to an investor.

 Hey Brian.  This will be a flip... or a BRRSH (Buy, Rehab, Rent, Sell, Humidor!)

As soon as we have leases for both sides we will offer to other investors.   We aren't going to go to market with it. They'll offer it to their other investors that are looking and I have a couple people that may be interested as well.

Our value add is coming two ways on this, obviously updating interiors to make units a little more attractive, but mainly from completing a lot of CapEx (new HVACs & hot water tanks, siding & trim repair w/ new exterior paint... and the roof is only a few years old)

So increase rents, and have the majority of big CapEx stuff taken care of. That way buyer doesn't have to worry about that for a long time. Plus ~11 months left on leases for the investor that buys it with quality management in place.

TIME LOG: 

I thought perhaps some people would find it interesting to see my time input as it goes along, and I thought it'd be interesting to know as well.

• Tuesday April 11 (evening): Receive notification of property for sale (and a few photos). Do preliminary analysis: Did a tax search. Google street view to see what's around it. Roughly calculate renovation costs. Look at what other multi family are listed at as compared to rents and finishes. Estimate what I could sell for renovated. Decide I'm interested. 
  
  • TIME SPENT: 15 minutes
• Wednesday April 12 (morning):  Drive to property.  Walk the exterior only & estimate repair costs.  Adjust renovation numbers.  Look for major issues (none).  Call and say I'll take it.  
  
  • TIME SPENT: 1.5 hours (1.25 of that was driving)
• Thursday April 13:  Sign contract for cash purchase.  5 day inspection period, 15 day close.  Figure out where the money will come from.  Offer 12% to a private lender for $50k (who said yes). Then $30k from one of my LOCs, $10k +/- in the account I will use. 
  
  • TIME SPENT: 15 minutes
• Friday April 14: Walk through interior of property. Make sure there are no surprises and nail down what work needs to be done. I have my property manager and contractor meet me there.  After we go back to property managers office, figure out what work will add value (both in rents and in resale value).  Put plan together.  Drive back.  Use drive time to get costs for plumbing and HVAC and schedule them.
  
  • TIME SPENT: 2.5 hours (about 1.5 was driving)
• Monday April 17: Get official bid from contractor.  Discuss one of the optional items his cost to do wood treads.  Call my flooring guy, get rough cost on carpeting stairwell (decide to carpet).  Call my appliance guy for costs on 2 washer/dryer sets. Update excel with final numbers.  
  
  • TIME SPENT: 30 minutes
• Wednesday April 19: Receive check from private lender. Go to bank A to pick up check from LOC. Go to bank B to deposit both checks
  
  • TIME SPENT: 1.25 hours (1 hour driving)
• Friday April 21:  Drive to property.  Pick exterior colors.  Go to flooring contractor, pick out the vinyl and carpet.  Drop off check with GC & paint colors. 
  
  • TIME SPENT: 2 hours (1.5 driving)

Total Time So Far:  8.25 hrs (5.25 was driving)

Estimated time remaining: 12 hours?

It would go to travel. I would find some crazy excursion to do. OR: I would get good seats for the Final Four/Championship and the Super Bowl and if anything left World Cup game or two. Doing major sporting events once is a bucket list ( low on it, but on it). I did two World Series games. ... I need to keep finding properties to flip in our "retirement"!

@Kerry Baird @Chinmay J. - LOL... Yeah if it's not the weirdest reason for a flip it has to be close to it!

As soon as I'm done typing this I am going to go: 

1. Verify the exterior paint colors I chose last night
2. Go to my flooring guy, select floors, and schedule install
3. Drop off deposit with my contractor (as well as paint colors)
4. Schedule the tub resurfacing
5. Call my appliance guy, order washers/dryers, schedule install
6. Make sure my HVAC guy has me on the schedule for 2 new installs
7. Make sure the plumber has me on schedule for 2 new hot water tanks

@David Sanford

I would say if you're going to do this put in a full HVAC and lose the baseboard heaters.  I can't imagine leaving the heater out of it saving more than $1000-1500.  That would definitely be value worth adding if you're going to do it. 

My guess would be around $6k.  I'm figuring about $3500-4k for unit cost if you were replacing, and $2k-2500 for additional ductwork, line sets, and hookup.  I sent a text to my HVAC guy.  If it's much different I'll let you know. 

$200 per month for vacancy, repairs, maintenance, and CapEx isn't going to cut it. One vacant month and there's your best case cashflow for 7 months gone. HVAC needs replaced? There's two years of best case cashflow gone. Then you still have all the other repairs and maintenance to take care of. You would need big appreciation and rent increases to ever make money on this.

I'd say put a ring on her finger.  That'd make all this really simple!

For what purpose?  Are you thinking of selling or refinancing? If not, there's no reason to pay for appraisals.  

If you are thinking of selling or refinancing the bank typically has to be the one to order the appraisal and they won't use one you bring in so you'd have to pay for it again. 

I have 107 units across 49 properties.  I've never just randomly gotten one appraised. 

Originally posted by @Martinis Jackson:

Austin, really appreciate the advice. Very helpful!

 If you have idea of which of those options you'd like to do, then I may be able to help more with additional info. Especially if you go the Option 1 route there is a lot to consider. Option 2 is pretty straight forward. 

I assume your friends don't have the experience and it's all about your expertise and knowledge... that you'll be finding the deal, running the deal, and also managing the asset after and they'll just be putting in cash? If so....

Option 1) they put up the money, you put in the time.  50/50 split between you and the investors.  Cash flow 50/50 and anytime you refinance or sell they get money back and any additional is 50/50 too.  (If you have 4 cash people: 50% to you, 12.5% to each cash partner.  If you are one of the cash you get 62.5%)

Option 2) Structure it as private lending.  Give them maybe 10-15% on their money while you're using it, then after you refinance and pay them investment plus interest you have the property fully on your own after the refinance and get all the cash flow.