Rental #6 Smooth as butter
Another project is getting wrapped up and I’m excited to share some details about it!
My deal processes are getting easier each time, and that’s great but the business lessons I’m learning are becoming far more nuanced. The last 2 deals I’ve done have gone very fast: this one was about 11 weeks and the previous was just under 9. Even though the process has gotten easier, it’s not to say there isn’t still a lot to learn each time.
This deal went very smooth, I did it long distance as usual, and by the time of this posting I’m already bidding on the next property!
Your goal is to keep smarter people around as much as possible
When I bought this house I really thought I paid too much. Not grossly overpaid, but 5-8k grand which is kind of a lot on a $55k house. I had recently closed on a refi loan so I had capital and I wanted to buy a house immediately. The deals in my area are getting tighter, competition is getting fierce, and rates are going up, so it’s time to move.
I’ve been working with a new realtor for this project and that’s it’s always scary to rely on new people. After not finding a deal for a few weeks, she convinced me to look back at this house after we passed on it. She made a great case for this property: good location (especially for the long term), the ARV will be higher than I had originally thought, and it was a simple rehab. Not the way I usually buy, but it sure didn’t’ sound bad!
I thought the ARV would be 80k at most and her estimated 90k was naively optimistic. 90k wasn’t out of the realm of possibility, but you should never buy a house assuming best case scenario. Luckily I knew if the value did come in a bit low we would be fine.
I also really wanted to show this person that I trusted them, and I wanted to actually put skin in the game on it. I think this is incredibly important in building a team. They must know you trust their advice
The house was a light rehab, that may sound good, but I was apprehensive that an appraiser would come look at a house that I JUST paid a total of 65k for, and give me 85k for it 2 months later. I have no idea how appraisals really get decided, but it seemed a little iffy to me. OK whatever, we moved forward and closed.
Appraisal eventually came in at 100k, more than either of us expected. The rent came in $100/month higher than we anticipated as well. How easy is real estate?!
This was an eye opening experience for me in terms of how to build great teams and work with people to accomplish common goals. I literally had a partner find me this deal, sell me on it against my intuition, and it turned out to be very profitable. All the credit for this deal belongs to my team, and I look forward to relying on them more in the future.
The money:
Purchase – $54,463
Rehab – $11,329
Total all-in – $67,487
ARV (after repair value) – $100,000
Equity created – 32,512
Rent – $950/mo
Difficulty – SUPER EASY
The total cost of the project is on line 120, this is what the lender is going to look at.
My process for BRRRR:
Bid
Offer Accept
Contractor estimate
Insurance quote
Add these to the HUD
Close. I paid for the house, rehab, insurance all at once, upfront.
Rehab
Tenant placement
Start refi loan process
Close
How could it be MORE easy?
In all seriousness, this was a fun deal and hopefully, this and my other deal writeups encourage people to go out and use this information to make themselves some money. I don’t make it seem easy, once you have great people it is easy.