Rental House #30 – Best BRRR Deal So Far

February 2016

We may sound like a broken record, but sending Yellow Letters is the gift that keeps on giving. We were sending about 700 letters a month. They are specifically targeted to non-owner occupied, long-term owners, in our specific zip codes.

Dave got a call on 6614 Defiant Gaveller and made the drive to the house to meet the owner. It’s a three-bedroom, two-bath house with 1490 sqft and constructed in 1979.  He realized the guy was desperate to sell. After walking it once, Dave met the owner at the local Jack in the Box and signed a purchase agreement for $76,500 on the back of his Accord’s trunk. Amazing deal. The only issue with this property was that the owner was moving out and had, a roommate at the house who wanted to stay. The roommate had no deposit with the prior owner, so we wouldn’t get a deposit transferred over upon purchase of the property. Not to worry, we made the tenant pay an extra $100 each month to create a deposit, and after 12 months, we had a $1,200 deposit ready to go.

Rental House Financing

On this house, we paid cash by using our friend’s savings to fund the deal. We used the normal process by promising at least three months of interest at 10% APR. which, in this case, was about $2,500. Our plan was always to do long term financing with our favorite small regional bank.

Initial Rental House Purchase With Short-term Money

Initial HUD

Rental House #30 Pics

Again, much like House #28, we don’t have any good pictures for this one. We’ve never had it empty or had to find a renter! These were the pics we discovered from the MLS on some old listing.

Rehab

Easy. There was none. Prior owner’s roommate became our primary tenant and has been there ever since.  We’ve never done anything to this house except one bathtub surround. It has been a total winner for almost five years.

Finance of The Property With Long-term Money

Below you’ll see our HUD for the loan with our favorite regional bank. We got $80,000 from the bank, which means this house appraised for $100,000. Remember, by looking at the initial HUD above; we only paid $76,500. So we essentially made $3,500 for picking up this property. This method is how we like it. This property is one of our best deals yet and is precisely the kind of deals of which we want 100!

Let’s Do the Rental Numbers

Loan is $80,000. As you can see we have about $361 leftover each month to cover any expenses with the property and for cash flow. Not a ton of room if you have to replace an AC or anything, but at least we know we are killing it on the principal paydown with an additional $240 per month on average in 2020, and we have zero of our own money in this one.

Net Worth Increase on House #30

We are getting closer to our goal of $1 million net worth. Let us know below if you have any questions on this one.