Project Summary

This was the client’s first acquisition of a property through an online auction. The home, a foreclosure and bank-owned property, had been on the market for an extended period of time. The client observed the property’s auction price drop with each iteration, and ultimately decided to place a bid. Salisbury, NC, a market that was only recently gaining attention from investors, offered greater affordability and less competition compared to more saturated areas like Charlotte, NC.

Initially, the client intended to flip the property and, within 24 hours of listing it, received an offer at their asking price of $110,000. However, after the offer was accepted, the buyer’s lender was unable to secure financing during the underwriting process. The team relisted the property and, within a week, received another full-price offer.

Once again, the deal fell through due to financing issues. At this point, the client reconsidered their strategy and decided to explore the BRRRR method (Buy, Renovate, Rent, Refinance, Repeat), a strategy they had recently learned about through the BiggerPockets podcast. They recognized that this property would be an ideal candidate for the method, so they shifted their approach.

After completing necessary renovations, the client successfully rented the property for $950 per month, which played a crucial role in securing a smooth refinancing process. The decision to hold the property allowed them to generate more cash flow in the long term, rather than flipping it for a quick sale.

The BRRRR method proved to be an excellent strategy for this investment. The client was able to acquire the property at an affordable price, make improvements, and refinance into a buy-and-hold loan with favorable terms. This approach also allowed them to recoup some of their invested capital through the refinance, which in turn funded a second project. Additionally, the method helped keep the mortgage payments low, while the higher rental income generated monthly cash flow.

Not only does the client benefit from consistent rental income, but they are also positioning themselves to avoid high capital gains taxes upon future sale, taking advantage of tax benefits associated with buy-and-hold properties, and building equity through both principal reduction and property appreciation. The current tenants have since renewed their lease for another year, with the property now renting for $1,000 per month.

Numbers Breakdown

Final auction purchase price – $42,500 

Renovation budget – $35,000 

Appraised ARV – $110,000

Updated Numbers Breakdown – 8/24/20

The client finally decided to sell this property and hopefully take advantage of the hot sellers market conditions to reinvest some of the capital they had tied up in this property and their efforts paid off. See below for the final numbers breakdown for this property:

Purchase price: $42,500 

Renovation cost: $37,000 

Rented for 12 months at $950/month and 8 months at $1000/month: Cash flowing around $300/month on average

Sold: $126,500

Total Profit on Sale (not including taxes): $42,000 (Rental income not included)

Total Profit with Average Rent Cash Flow: $42,500 + $6000 = $48,500 Total Profit

Final Numbers Summary

$42,500 Purchase Price · $ 126,500 ARV
$ 11,900 Cash Needed · $ 290/mo Cash Flow · 23.3% Cap Rate · 27.4% COC

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Progress Photos

Listing Photos