I have some exciting news to share! I’ve closed on my first BRRRR real estate deal in Fayetteville. I am pumped to complete this first deal, get the repairs done, get it rented out, pull my money out of the deal, and then do it all over again!
This BRRRR deal is on a 3-bed, 2-bath, VA foreclosure, for $75,000 in cash. The original repair budget called for $12,000, but it looks like it may be a bit higher than that ($12,500). It needs a new roof, paint, light fixtures, and some other repairs. I still feel comfortable with the estimated after-repair value of $116,000.
According to my contractor, the repairs should only take 4 weeks. At that point, we’ll look to get it rented at $925 – $950/month. Assuming it appraises well, I can then refinance via delayed financing with my lender and pull out most (if not all) of the investment, with a 30-year mortgage placed on the property.
The numbers from my original post still look mostly accurate, however, time to refinance may be shorter than two months. The numbers below assume that I will pay closing costs ($2,500) out of pocket.
The cash flow doesn’t look strong, but there should be at least $15,000 – $20,000+ in equity created ($90,000 investment and $110,000+ after-repair value).
(BiggerPockets BRRRR calculator).
Here’s a brief timeline of how this deal came together (small details excluded):
- November 2018: Starting researching markets for BRRRR investing, settled on Fayetteville, N.C. over Columbia, Atlanta, Charleston, Raleigh and others, due to the lower capital requirements and strong rental market.
- December 2018: Contacted several realtors in December 2018 to talk about my plans of completing BRRRR deals in 2019, and to get added to the multiple listing service to receive property listings. Reached out to local lenders for delayed financing options and property managers.
- January 2019: Spent a month searching for properties online. Got an offer accepted on a Hubzu auction property, but backed out after finding much more $$$ in repairs than estimated.
- Mid-January 2019: Got outbid on another property shortly after. Starting to get bummed.
- Bid on a new property in and entered into a highest-and-best offer phase. Bid over list price and won the property.
- Visited the property in person and did a walkthrough with realtor and contractor/property manager. Termite inspection and HVAC estimates completed.
- February 2019: Proceeded with the purchase and closed on Friday, Feb. 15.
Repairs on the property will begin on Tuesday, Feb. 19, with an estimated completion date of mid-March. There are a few things I need to go right over this next month for this deal to work out.
First, I’m really hoping there are no surprises during the repair period. For example, what if the HVAC needs more than just a tuneup and minor repair? We’ve only budgeted for $560 for that. My other concern is with the roof. What if there’s been a leak inside the attic and some damage?
The other concerns include: our ability to rent out the house at the price I want ($950!)and in a timely fashion, and if the house will appraise well (really need $110,000+). These are certainly some of the key risks to BRRRR investing. I won’t be able to pull out my money if it doesn’t appraise. But we’ve done our research and I feel good about the comparables we’ve pulled.
Overall I feel good about my first BRRRR deal. What do you think?