I wanted to do a post for the properties that we BRRRR to encourage existing and future investors to go do great things, then share their experiences so that we all learn and get better.

BRRRR stands for: Buy, Rehab, Rent, Refinance, Repeat. Once you understand the concept, its a truly beautiful thing because you now have a perpetual money machine. The basics:

Buy--The more work it needs, the better. Make sure that the ARV (after repair value) supports the refi process and that it will cash flow after complete.

Renovate--Fix it up! Create value wherever possible.

Rent--Find tenants, maximize your rents.

Refinance--Go get new long term financing at a good rate and good terms. LTV and cash flow is king. Show off your fancy new tenants and house to your lender! Cash out as much as possible for future deals.

Repeat--If you played your cards right, your total investment in the deal is now should be either $0, or you might even take cash away from closing. You now have a cash flowing property with no money in the deal. Now go do it again.

If you want to read more, here's the book on BRRRR:

https://www.amazon.com/Buy-Rehab-Rent-Refinance-Repeat/dp/1947200089

And our first subject for this thread is....

408 Tabor St, 77009

https://www.har.com/homedetail/408-tabor-st-houston-tx-77009/9408863

This one was listed at $375,000 and while it had multiple offers, we paid $409,000 less about $4,000 in credits for things found during due diligence, so say $405,000. It's currently a 2 bedroom, 1 bath, and we plan to turn it into a 3 bedroom, 2 bath, without moving any exterior walls, and then AirBNB the property. I'll update with renovation scope and pricing early next week, but here are some pics:

Is this the perpetual money machine you are trying to get to?




either way, definitely interested!

Great post Jamie, am interested in watching this unfold. I've definitely got a couple questions about the refinance at the end (why).

So just ballparking here, you probably put down 10% on a 30 year note at probably 4.5% because this is an investment property. So that mortgage is probably $2050. Taxes at 2% effective would put it at 7400 a year or 620 a month. Insurance probably 1500-1800 (150 a month) as an umbrella policy for renting out. So total monthly costs are 2880 just on the note, probably 3100 after electricity, water, gas, internet.

So you're plan is to add a bedroom and bathroom. I assume that master suite took over an original 3rd bedroom with the interesting trim work where a dividing wall would be. Its on a pier and beam foundation so adding baths aren't that big of a pain compared to slabs. With your penchant for sweat equity you're probably looking at 15k-20k and 3 months of work.

So 26k to get it ready for AirBnBing and interest lost while it sat.

So you've refinanced, you've made yourself whole on your renovation costs now its time to cash flow. AirBnBs in that area are actually pretty hard to get a reading on. Looks like people want to sleep 6 or 8 (good reasons for your bump) and are willing to pay 200-280 a night for that. So if you find a way to get booked solid, you're probably looking at 7000 a month in revenue after you collect those sweet sweet cleaning fees. But usually people aren't booked solid. So probably half that. 3500 a month on a 3100 loan.

So my big big question to you is, what are you adding to your AirBnB that drives foot traffic to the point people will just come stay on a tuesday night at your place?

Great stuff!

We bought this for 55k.

Cleaned it, listed it for 125k

It's under contract for 120k

If it wouldn't sell we would of pt a tenant in at $1200 a month abd refied with a local bank.

BRRRR is the only way we invest abd are doing it with small apartment complexes.

I can't stress enough how important it is to do your due diligence and make sure the rental market exists for you to reach your goals in the deal. Jamie would agree with this.

If you are paying $350,000 and the ARV is $500k but the average rent in the neighborhood is $1,200, you're going to have a hard time being successful.

Do your research and run a conservative pro forma. If you ever have to start making aggressive assumptions or leaps of faith to make a deal work, it's not a good deal.

Oh are you guys tempting me to really tee off on Cardone. He's a major crook, and I say that with very solid evidence. Let's start with some serious long-term analysis:

- https://tonyortega.org/category/scientology/grant-cardone/

- https://scientologymoneyproject.com/tag/grant-cardone/

Also, regarding Jamie's BRRR strategy..

When you pro forma the deal, you better be operating under the assumption that your refinance will be at rates at least 50bps higher than they are when you close. Hopefully they aren't, but a higher cost refinance than expected can squeeze your profit margin if you're not careful. Always plan on the conservative side.

Remember, you're looking for deals, not to buy for the sake of buying.

Outstanding analysis. I'm going to try and unpack the deal as best I can here.

As mentioned earlier, the room dimensions gave us hope that we could expand into a third bedroom, but we couldn't verify until we saw the house in person. Once we saw the home in person, we made an aggressive offer that we hoped would win us the deal, but allow profit once renovations were factored in.

We decided to put 25% down, which allowed us to get conventional financing at something like 3.25% at par, but because we are planning to refi once the renovations are done, we decided to take something like a $3,300 credit from the lender, and increase our rate to 3.625% (the break even is approximately 36 months, so as long as we refi before then, taking the cash makes sense). 25% down at 3.625% is $1,398.94 per month for principal and interest.

For taxes we assume 2.5% (but as Diggity mentioned, its something lower, so this is conservative). And for insurance, we have a great insurance provider that got us a rate of $1,500 (that will decrease to $1,100 per year once we replace the 17 year old roof).

So we've got a total monthly payment of:

PI: $1,398.94
T: $852.08
I: $91.66
Total: $2,342.68

Because we decided to AirBNB it, we will need to pay to furnish the home (I'll do another post about this, but we are going to spend right at $6,000 to fully fit out the home), as well as the following monthly costs:

Water/Sewer/Trash: $40
Electric: $150 (estimate)
Gas: $25
Internet: $75
All other items: $100
Subtotal: $390

Grant Total: $2,732.68

Next up, AirBNB...the story one MEEN Ag has been waiting for. This isn't our first go with short term rentals, we've been doing them for about 3 years now. Here's the secret sauce....

Clean.
Take good pictures.
Communicate effectively.
Make check in seamless.
Transition quickly between guests.
Provide a good value to guests.

That's it. If you can do all those things, you'll do well.

On the revenue side, I never want to be completely reliant on anyone, so I won't do a deal if it ONLY works as an AirBNB. This one works as an AirBNB and a long term rental, so we could do the deal comfortably. My guess is that as a 3/2, I could rent it for around $2,600 on a long term basis to a couple of kids fresh out of college who are looking for a fun spot in the Heights. So that box is checked. On the AirBNB revenue side, here is our conservative analysis:

30.5 days in a month
$225 per night (this equates to about $300 per night for the guest after cleaning fees, AirBNB fees and taxes)
75% occupancy
So that's $5,146.88 in gross revenues per month.

The reality is though, that some months we do better than 75%, and others we do worse. I just opened up one of our other units from a guest that stayed about 45 days, so that worked really well.

Posts for another day:
Construction Budget / Scope / Process
ARV
AirBNB Furnishings
Cardone rant (don't sue me bro)

EclipseAg said:

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Red Pear Realty said:

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Because we decided to AirBNB it, we will need to pay to furnish the home (I'll do another post about this, but we are going to spend right at $6,000 to fully fit out the home)

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That seems incredibly low. I just finished getting new living room furniture, and we spent $10,000. And we were bring frugal.

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Facebook marketplace is frugal. 10k ain't frugal. You might be deal hunting, but you still went to restoration hardware, not exclusive furniture (where low prices live).

Interesting thread. What did you base your 75% occupancy on?