I am happy to report that the final numbers are in from our first TWO successful BRRRR's (Buy-Rehab-Rent-Refinance-Repeat).
Who says lightning doesn't strike twice? These were two half-houses (left and right side of a building - we now own the whole building) that we separately purchased, rehabbed, rented and refinanced.
We bought the first property (Left Side) off the MLS and began rehabbing (we found a great contractor who did all the work). The rehab took about 10 weeks. About 3 weeks into that rehab, my contractor texted me that water was leaking into my property from the other house (Right Side). Even though I hadn't met the property owner or occupants, and without knowing any other information, my first thought was "I'm buying that property!"
I was out of town and my contractor did an excellent job of dealing with the water situation, and this gave me an excuse to contact the owner of the property. I came to find out that the property was recently vacated, and the former owner was recently deceased, the estate needed to sell BAD. I was happy to swoop in and save the day!
I purchased Right Side while Left Side was about 50% complete, and brought in another contractor to do the work on the Ride Side. We kept it simple - both sides used the exact same flooring and paint color. It was pretty cool to have two rehabs going at once, and super convenient that they were right next door to each other! Both contractors were great to work with - high integrity and quality, and reasonable pricing.
Left Side required mostly cosmetics - new floors, new bathrooms, new kitchen, new appliances, drywall, new electrical upstairs, and paint.
Right Side was on oil heat (50+ year old furnace!!!), so the big ticket item was switching from oil to gas and putting in a new gas furnace. We also put in new floors and paint, redid one bathroom, and some new appliances.
We are using a property manager on both of these properties - the same one we use for other local properties. He filled Right Side in less than 2 weeks, and he filled Left Side in about 3 weeks.
The acquisition of both properties were funded by our own cash (about $31K) and also a few HELOC's (about $57K). The rehabs were funded by private loans at 12% interest. The private loans were repaid in full after completing the cash-out refinance, and then we received nearly all of our money back to pay back the HELOC's and replace most of the cash initially invested.
We found an AWESOME portfolio lender in our area to do the cash-out refinance for both properties. They offer 80% LTV, no seasoning period (meaning we can refinance as soon as the rehab is complete), 5% interest fixed for 10 years, 30 year amortization. Plus this lender loans to LLC's, so we were finally able to form an LLC to put on title for the properties (this is great for another layer of asset protection). These portfolio loans are a game changer!
Both rehabs went well and stayed on budget. We rented BOTH sides out for $100 over our target! The appraisal came in $2K over our target for Left Side, and $1K under target for Right Side (the reason the appraisals were different is because Left Side has 2 full baths, and Right Side has 1.5 baths). So, overall we are pleased with how this turned out!
See below for final numbers and before/after pictures!
Notes on metrics:
- Holding costs include interest payments for HELOC's and private loans, utilities, insurance, taxes and appraisals
- "Total Cash in the Deal" is the total cash initially invested minus the cash that we got back from the refinance
- "Cash-On-Cash ROI" is the Yearly Cash Flow divided by Total Cash in the Deal. Think about this another way...how long will it take to recoup my cash invested? For example, we have $3400 invested in the Right Side, and our yearly cash flow is about $3300, so I will recoup my initial cash invested in about a year!
- Equity Gain - this represents our increase in net worth after these projects were completed. We gained assets worth $191K, gained liabilities worth $153K, and spent a net of $10K. So we have an equity gain (on paper) of about $28K.
Left Side
Right Side
Left Side - Living Room
Left Side - 1st Floor Bathroom
Left Side - Kitchen
Left Side - Kitchen
Left Side - 2nd Floor Bath
Right Side - Living Room
Right Side - 2nd Floor Bath
Left Side - Bedroom
Right Side - Kitchen
Right Side - Furnace (switched from oil to gas)