Case Study- Brooklyn BRRRR

We recently closed a cash-out refinance (DSCR Loan) for one of our more experienced borrowers in Crown Heights, Brooklyn, NY.   This particular borrower focuses on 3-4 family properties in up-and-coming areas of Brooklyn.  They focus on properties with a close commuting proximity to Manhattan. Additionally, our borrower only buys properties where outdoor space can be added. Once the renovation is finished and the property is leased-up, our borrower's property generates significant cashflow, allowing them to pull cash out of the property and move on to their next deal.  This is a classic example BRRR (Buy, Rehab, Rent, Refinance, Repeat), method that has allowed countless real estate investors to build wealth.  



Let's take a closer look at this deal. Our borrower purchased this property in November 2021 for $999,999.  As you can see in the images below, the property needed significant renovations.  Everything needed replacing- the kitchens, bathrooms and even walls needed to be removed.  To purchase this property, we gave our borrower an initial loan of 85% of purchase price ($849,999) plus a construction holdback of $677,000 for the renovation, for a total loan of $1,526,999.  The estimated After Repaired Value of the property at purchase was $2.225 million.  The renovation portion of the loan was disbursed as work on the property was completed.  This required out borrower to contribute about $200,000 of equity in the deal. 

Property Condition at Purchase:



The renovation of this property took about seven months to complete.  This included the full demolition of the property, framing for the new layout to maximize space, adding out door space, restoring the façade, as well new windows, flooring, kitchens, baths and lighting.   This was a full gut renovation and upgrade.

Mid-Renovation Pictures:


  

Once the renovation was completed in Summer of 2022, the borrower leased the property for premium rates, with an average rent per unit of $4,400. 

Completed Renovation Pictures:


 

The completed property’s value exceeded our initial estimate of $2.225 million and came in at $2.65 million valuation as per the appraisal completed in October of 2022.  The premium rent and valuation allowed our borrower to obtain a refinance loan of $1.965 million, which gave our borrower approximately $380,000 cash-out after closing expenses. This gave the borrower back his initial investment of $200,000, plus additional cash $180,000.   Our borrower was able to take the cash-out from the equity in this property and purchase another similar property.  BRRR at its best!

Please check out the full press release on this deal. 

John Femenia

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