BRRRR to 1031 Exchange

Investment Info:

Single-family residence buy & hold investment in Sherwood.

Purchase price: $47,336
Cash invested: $24,000
Sale price: $147,000

June 5th 2020
We just purchased this property from auction.com on Friday, June 5th, 2020. We plan on getting into the property on Monday, June 8th, 2020, to assess the work that needs to be done. Our budget for rehab is $36,000. We have the ARV at 105K and plan to refinish in 6 months and keep the pro rental.

January 5th 2021
The appraisal for the property came in at 95K, but we got away with only putting in 24K for the rehab. The property is now an STR and cash-flowing at $1400/mo.

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

We were looking for a property that would make an ideal short-term rental. In the beginning, it was great, but as our STR business evolved, the property's one bathroom no longer met our target audience's needs, so we decided to sell it in 2025.

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

We found this deal on Auction.com. I live in Texas, and my parents live in Arkansas, so they walked the property before we bid on it to see the extent of the work that needed to be done. People were living there, so we were confident that all major systems worked in the house, and we were correct in our analysis.

How did you finance this deal?

We financed this deal with a home equity line of credit and made all of the repairs using a business line of credit.

How did you add value to the deal?

We added value to this deal by putting on a new roof, replacing the floors and windows, applying interior and exterior paint, and installing new countertops in the bathroom and kitchen. The rehab was really light. The previous owners were hoarders, so once we were able to remove all of the junk from the property, the rehab went pretty quickly.

What was the outcome?

We were all in on the property at $71,336, which was appraised at $95,000. Today, in 2025, the property has been sold for $147,000, and we are under contract with a 2025-built duplex. We used the proceeds from this property to buy the duplex, which we plan on turning into a mid-term rental.

Lessons learned? Challenges?

The lesson I learned from this rehab was that I should have taken the extra time to add a bathroom. I would have been able to significantly increase the ARV and have a better clientele for my short-term rental business.

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

I used Shanekia Rash-Parker in Little Rock, AR, to sell the property, and I also used her to buy the duplex that we 1031 exchanged for. I used Cross Country Mortgage as the lender and Deferred as the 1031 exchange company. All of them made this process exceptionally easy.