Type of property: Triplex with an unfinished shed.
Location: St. Petersburg Florida
Price: Listed at $214,000. Purchased at $ 201,000. Negotiated the price down using inspection report – found damaged roof, termite damage.
Financing: Conventional loan, 25% down payment at a 30 year term at 4.5% interest. Loan amount: $150,152.
Outcome: BRRRR’ed it. I was able to force appreciation by fixing all the deferred maintenance items including new roof, electrical panels and etc. We also fully remodeled one unit that was vacated after tenant lease ended. There is still more value add potential as there are 2 other units that can be remodeled and an existing shed that can be turned into a 1 bed, 1 bath unit.
Net Cash flow per month: $1,069. Cap rate: 12%. Cash on cash return: 44.3% per year.
BRRRR (numbers) breakdown:
Buy – Buy at 201,000. Down payment = $50,250.
Rehab – Total rehab costs at $26,390. Includes new roof, replace all electrical panels and outlets, Remodel of 1 vacant unit, repair and repaint white picket fence, replace 2 exterior doors. Total cash invested: $80,660.
Rent – Total monthly rents at $2,940. Can be raised up to $4,310 after the shed conversion and remodel on two other units – cannot be finished yet (delays due to COVID 19). This will double cash flow to around $2,100 per month.
Refinance – Cash out refinance. I am expecting to receive a check for $52,890. How it works: Conservative estimate of the new value of the property after the rehabilitation efforts is 299,179. You can only get cash out up to 70% of property’s value, so 70% of 370,000 = $259,000. This will go towards paying off original loan and closing costs. Net will be $52,890.
Repeat – Put $52,890 towards the next deal!
Before pictures
After pictures
There is still a lot of meat on the bone in this deal. I should be able to do another cash out refinance after all the rehab is done. We decided to cash-out refinance earlier (7 months after purchasing) because we needed a liquidity event to purchase the next property.
UPDATE 3/9/2021:
There was a big surprise with the appraisal. The property was valued at $370,000, instead of the $299,000 I originally estimated. This gave me an extra $70,000 boost in equity. I received a check for $102,579.21 after closing the refinance. My first 6 figure check!
This makes this a bonafide home run. I have no more cash in the deal, so returns are infinite.
Real estate is awesome!