My first BRRRR deal in Fayetteville has officially closed! While the final numbers do not exactly match the original numbers I estimated, I still think this turned out to be a pretty good deal for me.
I was able to pull out approximately $82,500 cash out of the property via delayed financing with my mortgage lender. The house is now rented out and should cash flow at $180/month or $50-$75 per month when included repair/maintenance budget.
The figures below are outlined in my post on January 29.
(The numbers on the deal from the BiggerPockets BRRRR calculator).
Purchase price: $75,000
Estimated repairs: $12,000
After-repair value: $116,000
Rent estimate: $900-$950
Purchase price: $75,000
Appraised value: $113,500
Money left in property: $6,000 (includes closing costs)
I did this deal in all cash and did delayed financing with MC Mortgage, my local lender of choice. The repairs and certain other expenses like insurance go on the HUD-1 statement at closing. You then can get back 75% of the ARV once repairs are done and an appraisal has been completed.
- Contractors got to work on the property only a few days after I bought it. The total repair timeline only took about 4 weeks (ahead of schedule) and included a new roof, interior paint (great room and kitchen only), light fixtures, a new oven, an HVAC tuneup and other minor repairs.
- There were no major surprises. The repair job was completed in a satisfactory matter!
- The house appraised for $113,500. While this didn’t meet my after-repair value estimate of $117,000, it’s still well above the total amount I actually invested in the property ($88,500). So I was able to create $25,000 in equity on the investment, bumping my net worth up quite a bit.
- The house rented out literally one day after we put it on the market. And it rented out for the exact price we asked for.
- I ended up invested a little bit more money than I originally had intended to. We needed to put a new dishwasher in the house ($500), which was the biggest unexpected expense. The roof also cost a bit more than expected.
- I didn’t pull out my entire investment. One of my goals was to have very little cash invested in the house after pulling out 75% of the ARV via delayed financing. I pulled out $82,500, which means I have approximately $6,000 cash still invested in the house. I can’t complain though, because a significant amount of equity was created in the deal. I can now go out and re-invest the cash again.
- The cash-on-cash returns may only be around 9% – 11%. I estimate $600 annual cash flow on $6,000 invested in the property when factoring in a repairs/maintenance budget of 10%, but this is more of less what I was expecting from the start.
To recap, my first BRRRR deal went pretty well overall and I’m happy with it. My property manager handled the contractors doing the work, and he was on top of it from the start.
This wasn’t a risky deal to begin with. The house was built in 1989, was in decent shape and needed somewhat simple repairs – a roof, HVAC repair, paint, cleaning, etc. For this reason, I probably should have had lower expectations going into the deal.
Looking back, I also think I should have been more conservative with my ARV numbers, and maybe added in a 10% contingency for the repair budget. I think a good paint job goes a long way, too. The interior looked so much better after getting the living room and kitchen painted.
I’m happy to currently be working on completing my second BRRRR deal just a few months starting this one, and I think the numbers will look even better! Technically, you are allowed to have 10 mortgages financed at once, so I still have 7 more to go.