The Deal:
The absolute best part about the BRRRR method is how quickly you can scale your real estate portfolio when you find the right deals! The BRRRR method is usually the “secret strategy” that “real estate influencers” attempt to sell you, but don’t fall for these influencer tricks! The BRRRR method is just a really efficient way to invest, not a secret strategy. If anyone tells you there’s a secret strategy to real estate investing, it’s likely a scam. Hard-work, education, networking, and persistent action will always be the answer to closing deals.
Our team caught a huge momentum from our last portfolio deal (Deal #3, Deal #4, Deal #5, and Deal #6) and we didn’t want this momentum to stop. To keep it going we continued to connect with personal lenders so we could confidently make cash offers in the highly-competitive Huntsville market. Raising private capital is a lifestyle; you eat, drink, and breathe real estate investing. It’s one of my favorite parts of real estate because it’s incredibly fulfilling to highlight the benefits of real estate investing and explain how everyone can win in a real estate deal. As our team began scaling our portfolio, I began creating personal lending websites for all our investment opportunities that seemed promising. If you’re interested in doing this for your business, hit me up and I’ll show you everything I know! Eventually, the right deal came along when we received a call from our real estate agent about a distressed situation she was looking to solve for her client.
Deal Source: Off-market deal from one of our real estate agents; When working with real estate agents, you want to work with “investor-friendly” agents. You want someone who invests in real estate themselves and searches for distressed properties for their clients. In this situation, the seller approached our real estate agent looking for a cash-buyer to close in two weeks so they could relocate for work in time. Our agent hit us up first knowing that we buy properties cash and we do so quickly!
Property Details:
3 bedroom 2 bath with bonus room; Single family house.
1,800 sq ft.
Located in a quiet neighborhood in the center of Huntsville.
Strategy: BRRRR (Buy, Rehab, Rent, Refinance, Repeat)
Estimated Numbers:
Purchase: $105,000
Repairs: $2,000
Rent: $1,000/month
ARV: $130,000
Financing:
Personal Lending: OPM (Other People’s Money); Same as Deal #3, Deal #4, Deal #5, and Deal #6. Our team recaptured most of its money back from the cash-out refinances from the portfolio deal, but not enough to fund the entire purchase price of this house, so we raised the money to close on this deal. If you’re curious on how this process works, check out our video here, it breaks down everything. Like I mentioned earlier, we positioned ourselves to be ready for a deal like this. So we were able to successfully raise the money within the two week timeline!
Rehab & Renting:
After closing on a deal we typically start the rehab process quickly in order to get the property rent-ready. However, this property was in great shape and didn’t need much to be rent-ready.
To their core, real estate investors are just problem-solvers and there are three types of problems an investor can solve:
1. Property Distress – The property is in bad shape and the owner doesn’t want to fix the issues.
2. Owner Distress – The owner is dealing with a situation and needs quick cash.
3. Market Distress – There’s too much supply and not enough buyers.
All of our deals up to this point have dealt with some sort of property distress, which is why we do extensive rehabs to the property. However, this time an owner needed quick cash and they were willing to sell at a discount in order to solve their problem quickly. It felt great to buy this deal at a price that worked for everyone.
The seller won because they got the cash needed to relocate to their new home.
We won because we got a rent-ready house at a nice discount.
The agent won because she got a nice commission check for connecting us with the seller.
Everyone is happy and everyone wins!
For the tenant selection process we did something different here. We normally give our properties to our property manager to find a great tenant, however one of our contractors fell in love with the place when they performed the inspection so we decided to self-manage the property and rent it out to them to add another win to the book. They moved-in instantly and it has been great for all of us!
The Refinance:
As I’ve mentioned before, the cash-out refinance is a pretty standard process. We started the application 5 months after closing so we could pull the money out asap in order to pay our personal lenders back. When we applied for the cash-out refinance we aimed for the moon and landed on the stars. We stated the property was worth $140k and the appraisal came back at $135k! We bought the property for $105k, so the property appreciated $30k in just 6 months, we love Huntsville! In the end, we pulled out about $100k, leaving around $10k in the deal after fees.
The Result:
Purchase: $105,000
Repairs: $4,000
Rent: $850 / month
ARV: $135,000
Since we self-manage this property we discounted the rent in order to continue the great relationship we have with our contractor. We are a team, when we work together, we win together! Numbers wise, cash flow is exactly the same because we don’t have to pay the 10% property management fees, so it all worked out. This triple-win deal turned into a quad-win deal after that. We love real estate!
Lessons Learned:
- When you buy off-market deals, have cash or be in the position to raise the money quickly. Strong cash offers will give you a great reputation and help you in a competitive market.
- Create relationships with investor-friendly agents, you never know when a pocket listing will come along.
- Websites impress personal lenders, create websites when you raise money. Contact me and I can help you out with this!
- Be open to solving any of the three types of distress: property distress, owner distress, or market distress.
