Our First (Almost) Real Estate Deal

If you’ve been following this journey, then you know that my wife and I are actively saving to buy our first real estate deal. We started saving in July of 2018 and we currently have about $35,000 which we have been parking in stocks with relative success. Our goal is to buy a property, rehab it, rent it, refinance our money out, and then repeat on another property. This is a real estate strategy that the folks at BiggerPockets have dubbed the “BRRRR” strategy.

I have been spending a good amount of time scouring the internet listings for a property, and we’ve already made a couple of offers that did not get accepted. Another thing that does not help is the fact that we’re in Massachusetts and the real estate prices here are astronomically high. Still, we are determined to make this work, and we got very close to our first deal! Here’s the info:

The Property was a 3 bed, 1 bath, 1,400 sqf single family residence in Douglas, MA. The schools are decent in this town, and we’re confident we’d be able to rent it for $1,700 while pushing all utilities, snow plowing, and mowing to the tenant. This property is owned by a bank, and the asking price is $135K.

I had planned was to acquire the property for $120K, and spend $45K on the rehab:

Rehab Costs

Water Heater  $2,000.00 

Oil Tank          $3,500.00 

Roof                $7,500.00 

Windows         $5,000.00 

Kitchen           $6,000.00 

Painting          $5,000.00 

Plumbing        $5,000.00 

Landscape       $5,000.00 

Flooring          $6,000.00 

Total Rehab    $45,000.00 

Acquisition    $120,000.00  

Total Loan      $165,000.00 

I have secured a lender that would give me an 80% rehab loan on single family properties, so my down payment for the rehab loan would be $33,000. Based on existing comps, we estimate that the property’s after repair value would be $230,000, and per the BRRR strategy we would refinance the project after 12 months. 

This means that we could potentially remove $40,000 from this property (more than our initial down payment), while leaving $57,000 in equity in the property. The mortgage on $230K would be about $1,400, meaning that we would only cashflow $300 per month, but it seemed like a solid first deal.

So, what happened? Well, we offered $105K, and got a counteroffer of $130K. We came back at $120K with the seller paying $3K towards closing costs, and… they accepted someone else’s offer!

My wife and I were bummed because this seemed like we were closer than the other offers we’ve made so far, but this also made us more motivated to keep looking for that first deal!

If you’re interested in a fantastic book about BRRR, please consider this one!