Welcome back to the Discount Property Investor podcast. Our mission is to share what we have learned from our experience and the experience of others to help you make more money investing like a pro. We want to teach you how to create wealth by investing in real estate, the discount property investor way. To jumpstart your real estate investing career, visit freewholesalecourse.com, the most complete free course on wholesaling real estate ever. Thanks for tuning in.

David: Going live. Morning coffee, it's actually about noon.

Mike: It's morning for Dave.

David: It's morning for me.

Mike: It's morning for Dave. I'm just kidding Dave works-

David: Morning coffee, let's do some case studies man. Let's talk about some of these BRRRR method deals.

Mike: Let's do it.

David: That we have added to the portfolio. We're trying to make more case studies as we go along.

Mike: Not just of the BRRRR stuff either, so our objective is really to go back and look at our entire what 4, 5 years now and just kind of document that and then as we continue, keep documenting it. Like we've been pretty good at trying to keep up with it, but not really bringing it all together and showing you how a project came together so that's why these case studies are pretty fun especially on the BRRRR deals, right Dave?

David: Yup.

Mike: And the BRRRR deals, why? Because we basically do everything you can do in real estate investing all-in-one property.

David: Yeah, and that's something to talk for a minute.

Mike: Yeah.

David: Wow.

Mike: I mean, you think about it like BRRRR is like- it's not for beginners but it is for beginners. Like it should be for beginners.

David: We did write a book on these guys, it's called 'The BRRRR Method'. If you're interested, check it out on Amazon and Audible. So Mike, that's a really good point, we do everything when we're doing a BRRRR deal.

Mike: Yeah, you- you- and again-

David: You gotta buy at a discount, that's where it starts.

Mike: Just the acronym, you're buying a house, you're rehabbing a house, you're renting a house, you're refinancing it. I mean again, that's all the stuff you can do I mean, besides selling it. It's pretty much everything you do in real estate investing.

David: Yes.

Mike: It's awesome.

David: Yes, that's right.

Mike: So again, so these case studies, that's why there's so much fun to talk about is because we're talking about real estate investing and it's everything.

David: Yeah, that's right. Well Mike, let's jump in.

Mike: Let's do it man.

David: What is the BRRRR method? Let's start with that. The BRRRR method guys is a strategy that we use to acquire a lot of assets with little to none of our own money. The way that it works, BRRRR method itself, let's start there. It stands for buy, rent- renovate, rent, refinance, repeat. People may say buy, rehab, rent, renovate or rent, refinance, repeat. Couple different variations in it but essentially it's rehab or renovate, right? So, you buy it and you gotta buy it at a discount, that's really part of the buy, you know, you can buy something retail and you can upgrade it.

Mike: Discount property investors.

David: That's right.

Mike: That's our big thing.

David: Update it and increase the value, but that's not going to typically increase the value enough to be able to get all your money back. So, part of this is buying at a discount, the other part is updating the property so every dollar you spend in updates really makes a dollar 50 or 2 dollars worth of equity.

Mike: It's adding value Dave. That's what's something I really really like about it and I like to talk about is adding value because that's what entrepreneurs, that's what investors are doing, you're creating value or adding value to something and that's how you make your money as an investor. That's how you really get good at this, you're creating wealth by adding value. It's very cool.

David: That's exactly right. So you're buying a discount, you're renovating this property, so you've added value by fixing it up and then you've got value cuz you didn't pay retail for it, you got a discount so those are two things that help. Next, you rent the property out, okay? and you basically get a lease that you can then show to the bank to say hey, this is an investment property and it is an asset not a liability, meaning at the current time, it's rented and the rent is bringing in more money than the current debt on the property so it's cash flowing, okay? and the refinance process can take anywhere from three weeks to seven months depending on the deal. In the beginning, it's going to take longer because there is this thing called seasoning and they basically just want to see that you know what you're doing and have experience, and the bank is reducing its own risk.

Mike: I would say in the corona times too man. I mean banks are just slower, I mean it's just everything is slower in the given time so plan on I mean, minimum 6 months right now I would say. If you're just starting out, you don't have a lender you're working with, six months is a really good timeline I'd say for turning your properties around.

David: Right.

Mike: So plan on it.

David: Absolutely man, absolutely.

Mike: But what's cool and what I really emphasize or I like to emphasize with the BRRRR method Dave is you can use someone else's money to buy, acquire assets and build wealth for yourself. It's mind-blowing when you think about it. I literally, we borrow money from someone else to buy an asset and to fix it up.

David: Yeah, we don't like to use any of our own money [inaudible].

Mike: So, we're using someone else's money to buy and rehab a property, we're paying them interest and pretty handsome interest, then we refinance it with the bank's money, so not our money and almost always we get all of our money back, sometimes a little more, sometimes we leave a little in the property but you're not using your money then you've got a tenant that's going to pay back that mortgage and you're creating value, you're building equity in these properties as well as cash flow monthly. Unbelievable.

David: Yeah, it's really really cool.

Mike: Like this is what I wish I would have started real estate doing this. I knew I always wanted to be a landlord and I was like, okay landlording, I don't have a lot of money. I'm gonna wholesale, did a whole bunch of wholesaling, still do. Love wholesaling. Don't get me wrong.

David: Wholesaling is great, we wrote a book on that too. But the thing about wholesaling- I'm getting excited here, I'm getting excited but the thing about wholesaling is it's a job.

Mike: Yeah, baby.

David: It's a lot of work and we love it because it gets us deals and it's fun, but it's a lot of work, right?

Mike: Look at Dave and I, we're getting old man. We're too old to be doing this everyday. So again, think if we would have started and done BRRRR from day one when you started real estate investing. How many properties would we have now? A thousand?

David: Yeah, we'd have a lot.

Mike: I mean, we'd probably move from singles into multi's and I mean, yeah it's just crazy. So, let's jump in Dave, let's look at the first case study we've got on this one and the reason we're calling it the first one, this is the first deal that Dave and I-

David: Yeah, we've got like four or five of them that we wanted to run through here today. So yeah, lets do it. So, the first one we did-

Mike: These are in chronological order from when we started out Dave.

David: That's right. So, I'm going to drag this onto the screen, we're going to make this full screen and then we're going to go ahead and add us back here so you guys can see us. So, this is a BRRRR case study guys, we are the discount property investors and 555 Benne Drive over here in St. Louis, Missouri 63031 is the property that we are talking about today. This is actually one of the first that we have- that we bought, right?

Mike: It's our very first property that we decided to hold as a rental.

David: BRRRR.

Mike: Correct. Our first one we decided to hold as a rental.

David: As a rental, as a company together, right okay, very cool. So, let's go through this and check it out guys. So, property images you can see here of the property. It's a ranch home. These are the before photos as well too so- looks like we have a picture of the garage, pretty empty and clean, picture of like the dining room or family room, wood floors, white walls, you know. Looks okay, nothing great necessarily. So, the purchase details and the plan. Mike, tell us a little bit about this one.

Mike: Sure. This was again, like we said our first deal purchased in July 2017. We used a private lender, kind of like we talked about before so we're not using our own money to buy this. We used a private lender to buy it for $72,300 and back then we were just kind of estimating about 90 days for a turnaround time so that's for a- to rehab the property and to go through and then get it refinanced with a long-term lender. We figured it takes about 90 days, 30 days kind of fluff it up give or take a few then you know 30 days to get the refinance done because we had already been talking with our bankers and they said yeah, go for it, we'll finance the properties for you guys. We estimated we're gonna spend about $10,000 on this property because it was not a giant rehab. Again, we didn't have a ton of pictures, Dave showed you a few of them but again, it wasn't a giant rehab. It was in pretty good shape so we just thought we'd spent $10,000 you know, painting, cleaning it up and then just get a tenant in place. We expected it to be- to rent at about $1,200 a month and have an $86,000 value when we were finished, so pretty low.

David: So we bought it at 72, we figured 45 to complete, 45 to refi so we figured 90 days. This is the first one we did, 10K repair budget so we went from 72 with it and we wanted to get it up to 82, right? Is that right? Am I reading this right? 72 to 82?

Mike: Yeah, I think that's-

David: But then we had an 86K value in complete.

Mike: Yeah, that seems a little bit low. I feel like that might be, we might be incorrect on that. It was probably about a 100k value in complete.

David: Yeah, I think the value was probably closer to a 100 on that.

Mike: Yeah.

David: Okay, cool. No big deal, let's keep it moving. So, we bought it a wholesale, and this was the first deal that we decided to hold as a company. We didn't really have a plan, we just wanted to fix it up and try to rehab it and get our money back and rent it out. That was kind of the plan that we had with BRRRR at the time. So, let's see how we actually did on this particular deal. Here is the property images after the fact so Mike I know we did do some renovating, some cleaning, some painting. It doesn't- this looks like that was probably an updated kitchen or was that original? I can't remember.

Mike: No, that was original to the property. That's how we bought it, I think we painted the cabinets, but don't hold me to that. Again, I don't know that we did much. Again. I think that a lot of stuff was in good shape, some of the carpets would have been replaced. We weren't using as much of the vinyl as we are now in all the new ones because again, the carpet was clean so we just-

David: Hey this was the beginning man, this was the first one. We're starting at the top of the list here.

Mike: I told you man, we're starting at the very first one. Yeah, yeah, yeah. Alright so let's look at the results on the next slide.

David: Okay, here's the results. We spent 7 on the repairs for a total of 79 thousand invested. Okay, that makes more sense cuz 10 would've put us at 82.

Mike: Right.

David: Right? We did get it rented for 1200 a month with a 459 a month net cash flow after all expenses. So, guys if you don't know what cash flow is, cash flow is what's left after all your bills. Your first and biggest and most common bill is going to be your mortgage, right? The mortgage may or it may not include escrow's for taxes and insurance. On top of that, you're going to have maintenance, you're gonna have vacancy, you're gonna have capex, these are expenses and then you're going to have management if you have a management company. So, the expenses altogether still gave us a cash flow on this property of $459 a month, which is awesome. Very cool. It did appraise for a hundred and a quarter which is what we corrected on that first slide.

Mike: Right, I think we were shooting for a hundred back then.

David: And it raised for a hundred and a quarter for an equity capture. Now again, this is equity capture on paper of $45,700. Wow.

Mike: Yeah, but this is material. This is really material though, this is really important and what's funny about BRRRR, you got to know your numbers and all these numbers play off of each other. So you can see David mentioned yeah, it's on paper but a hundred twenty five thousand, if we were to refinance out 80% of that, that's more than $80,000 Dave. That's like 90- 125 times 0.8, we could have pulled out $100,000. Do you follow?

David: No.

Mike: We bought the property for 70 something, we spent $7,000 so we're into it for 80.

David: Into it for about 80, yup okay.

Mike: Now, this thing appraised for 125 so if we refinanced out at 80% of the loan-to-value, we could have pulled out $100,000 meaning we could pay off our lender in pocket $20,000.

David: Oh yeah, 96 is basically 80% of 125, so about a hundred yeah.

Mike: Right, so we could have pocketed money on this deal. I don't know exactly what we did.

David: I'm pretty sure that we just got the payback.

Mike: We normally, that's what we're shooting for. We're not trying to leverage ourselves too far. Occasionally, we will take the money, just depends on you know, the deal and everything. So, with $459 per month net cash flow again I think Dave's right. I don't believe we actually pulled out that money but a very good deal. Next slide is kind of our summary.

David: Okay, here it is.

Mike: So, there's all that money.

David: Equity capture. There's our property image right there and we have our equity capture of 45,700, a monthly cash flow of 459 and we did refinance this out with long-term debt. We paid back or private lender which gave us money to buy it and fix it so we didn't have any of our own money invested in this deal, which is just awesome. I love doing these BRRRR deals guys. This is very very cool. So, let's go back, gotta change my camera here, there we go.

Mike: Extreme close up on Dave, yeah.

David: That's right and let's look at the next one guys. So, we have 2477 Ashland and let's get us back up, there we go.

Mike: Alright guys, so this is another BRRRR case study. This is our second deal that we've done together as the discount property investor team located here in St. Louis, Missouri 2477 Ashland. Let's go ahead and jump into what BRRRR is. BRRRR again is buy, rehab, refinance, what did I skip? Rent and repeat.

David: Rent, refinance, repeat. [inaudible] always.

Mike: Eh it doesn't matter.

David: There's a lot of R's in there.

Mike: Well, there's so many R's, I get lost.

David: Yeah, you buy it, you rent it, you take it to the bank, you get a long-term loan, you repeat it. That's the process.

Mike: Alright, so this was our second property that we were implementing the BRRRR on. Dave, let's jump right in man.

David: Alright, 2477 Ashland. I remember this one, this was like a one-and-a-half story. It's in a great little part of town, maybe only about 10 minutes from our office right here. When we bought this property, it needed some updates. I don't know if we have two slides of those pictures or not, but this is actually a upstairs picture. This is a picture looks like of the patio area in the back and the living room.

Mike: And that was where- that's the patio so that was where we did most of the work. I mean, drywall this- painted, there was some concrete work we had to do in the basement, but it didn't need a whole lot. So let's  take a look. So, we purchased this back in seventeen as well 2017. We bought it for $57,000 in change, used a private lender. We estimated again, 45 and 45, so 45 days to complete our rehab, 45 days to complete our refinance. The estimated 10K repair budget with 86k value when completed. Again, I think that might be a little low again Mike.

Mike: I think that's- no I think that was right on this one.

David: This one? Okay.

Mike: Yeah, because-

David: So, either way 57 plus 10, we're gonna be all in at about 67 and this one was 86.

Mike: Exactly.

David: So, this one might have been a bit- might have to leave a little.

Mike: And I also had to convince you guys that this area was good. Took you guys a while to come around a little 6314, Overland, St. Anne, St. John. Yeah, they're pretty good areas.

David: So, the rehab plan. Mike or Dave will have to repair the back porch as we talked about, we clean and painted the entire house, we did some flooring but all-in-all, we didn't do anything major. We didn't do any bathrooms, we didn't do any windows or roof, we didn't do any kitchens. It was a lot of cosmetic stuff but not that much, right? We estimated about 10- about 10 grand in repairs. So again, we cleaned it up, we painted it, you know, we got all the floors cleaned. I don't know if we did do a full sand and stain, we may have just done a poly on them and this kitchen was basically the before and the after picture.

Mike: It was. So, you can see the middle image is that back patio after, so it was- there was missing drywall, it's all cleaned up. The kitchen, one thing we do especially when there's decent cabinets is we'll save them and we'll clean them really really well and then add poly on top of it so it really makes them shine, makes them pop, makes them look like new. It's a pretty cool way to save older cabinets and make them look super super clean and super super new. So, let's go ahead and jump into the next slide here Dave.

David: I thought so, here we go, let's keep it moving. So, we spent 13 on our repairs, we estimated 10, we went over just a little bit but that brought us to a total amount invested of 70 thousand. We went and we rented- see, I think that 84 was wrong, it's 104 man, that's what I'm saying. We rented it for 12 hundred a month, no big deal.

Mike: It's not wrong, it's what our expectations versus reality.

David: Okay, okay.

Mike: Dave, so again, these are what we thought we were gonna do versus what actually happens.

David: I see where your mind is on that. You created the slides my friend, you get it.

Mike: I know, so we thought we were going to spend 10 on repairs when we spent 13.

David: Ah.

Mike: Just like we thought it was gonna be worth 100 or 86, then it was worth 104. See what I'm sying?

David: I get it. I do. I like where your head's at.

Mike: Yeah, yeah, yeah man. These are real results baby.

David: Yeah, that makes sense. So, we rented it at 12 hundred, in this case, we had $514 a month in net cash flow. That's again, that's after all our expenses. That's our mortgage, our management, our maintenance, so and so forth. It did appraise at 104, and again, we kinda estimated 86, we got a good appraisal on this and we didn't really renovate this entire property, right? Again, we didn't do a kitchen, we didn't do a bathroom, we didn't do roof or windows. Now, we did spend $13,000 but you know some people could spend 13 grand on a bathroom, right? So we kinda let that money expand out and do as much as we could with it for the most part. So, appraised at 104 with an equity capture of $33,987. The results on this deal again, 33,097 equity capture, monthly cash-flow at $514 a month and we didn't- we're not touching on the actual dates in terms of timeframe, but we are talking about our estimated 45 and 45, and  to be very clear and transparent with you guys, you know now, we're able to do it in 45 and 45. When we first started, it probably took us more like 60 and 60 or even closer to 90 and 90 because again, we didn't have all of our relationships with our bankers and we didn't have our- a good set of crews that are- that are working with us and making it more efficient. You know, everyday in our business, we're getting better and better at that.

Mike: Yeah, for sure. Some projects took us a long time, some were done really quick, so yeah.

David: Awesome, very cool. So, that is basically number two. That was 2477 Lindsay- or Ashland, 2477 Ashland. Next, let's take a look at 560 Jamaica. Gotta do a little camera tricks here guys. Let's go to this one, we're going to go to Jamaica. Let's get us back up there bud, alright 560 Jamaica. This is basically the third case study that we're going to be looking at today guys, 560 Jamaica. Here are some photos of the property. Looks like it could use some paint, the flooring looks kind of dated, the outside looks like it has like a little bit of a carport on the side of the house. We don't have a very good front photo of the property but doesn't matter, this is a rental guys, it doesn't matter, right? So, the purchase, we bought this one back in looks like July of 2017. We bought this for 59,461 using a private lender. Again, we estimated 45 and 45, that's the rehab and that's the refinance. The estimated 16k repair budget with 93 thousand value when we completed and about 1,150 in rent, so we borrowed about 60 plus 16, so that's about 76 thousand total but we estimated 16 grand for the repairs. So, let's see how we actually did, here was our rental rehab plan. This was first bigger project using third-party contractors, good notes in there. Clean paint, new counters, new water heater, new hardware and clean and paint basement, exterior clean up.

Mike: Yeah, so there's a lot of big- a lot of little stuff but again, we were using a third-party crew so what David touched on is that we used our- we were kind of using hodgepodge, we didn't really have crews at the time and then this one, we actually hired out because again our crew was doing some of the flips for us but not necessarily the BRRRR projects so we didn't really have a full capacity crew so we hired a third-party contractor. So again, how do you get good at that? You got to do it. So, we hired third-party, they did most of this for us. Dave, the next slide I think has our pictures of after and again, we are not great or we were not great at documenting all this so again, we don't have tons of pictures.

David: Yeah, this is just from our archives of photos from back then.

Mike: Exactly.

David: But we got about a hundred of these to get through guys. So, what are we on? Number three? It's gonna get better.

Mike: Yeah, hopefully.

David: All right, so here's our rehab photos. It looks like they did get a new countertops, new- probably new fixtures and the bathroom, it looks like we didn't clean it up much. I mean, we didn't paint the tile like we would do now.

Mike: Yeah, exactly. We've learned a lot of tricks too so it looks like we put a new vanity in but we didn't paint the tile and by paint, we mean glaze.

David: Glaze, it makes it look pretty and new.

Mike: Exactly, the tub maybe you have to leave in place because of expense or whatever but you can have it glazed and again, glazing the tub is not perfect and it does get worn and beat down but it lasts for a few years or a few tenants and it makes it look white, clean and new. So again, you get a higher appraiser or appraised value. The appraiser comes through and says oh, this looks really nice. It looks new, it looks clean, it looks nice. So again, these are kind of some of the tricks that we've picked up over time.

David: Very cool. Let's look at the results here. We spent 17 grand on repairs, so again, we have a total of about 76, bought it for 59 and change, we'll call it 60, added 17 in it. 76 thousand in change was what we had invested in this deal. We rented it for 1150 a month with a net cash flow of $472, that's after all of our expenses. That's 472 a month coming in which is awesome on this property. It appraised at 95 thousand for an equity capture of 18 grand and some change. Here's our results: 18,339 equity capture, monthly cash flow on this one was $472.

Mike: So what's really neat? Okay so although we spent more than we expected, we said we were going to spend 13 and we spent 17, and it appraised for 95. We were able to refinance this at 80% loan to value and get $76,000 back.

David: We had to leave a little then.

Mike: So, very little- Exactly, so we leave a little but if you noticed, the monthly cash was 472, so after one or two months, we've got all of our money back. So again, yes there was some money left behind, 100%, full transparency and sometimes we leave even more behind, but it comes back to us in the cash flow. That's why you have to know your numbers and you have to be planning on 3-4 hundred dollars per month in net cash flow after everything is taken out. That's very important to us.

David: Great point Mike.

Mike: Sweet, sweet. So, that's number three, that was Jamaica. Let's look at another BRRRR study or another BRRRR case study, and I think we're starting to get more pictures on some of these.

David: 4- 290 El Dorado is what we're gonna be looking at next here guys.

Mike: Awesome.

David: 290, El Dorado and this one, here we go, some before photos. It is- where is this one? Is this in Florissant or something Mike? I can't remember.

Mike: It is indeed.

David: Florissant, looks like a little ranch. It's a brick home and on the inside you can see we had some dated kitchen, right? You have dated flooring, you have dated cabinets and countertops. Not sure what that lower picture is, it's cut off by the logo. This appears to be the basement here, it looks like it was finished at one point, but it's kind of dated and it could use some clean up.

Mike: So, on the top- yeah, the top right where we are hanging out, that's actually the bonus room off the back of the house in the kitchen.

David: Up there?

Mike: Yeah, see that nice window? So, that's like a big old bonus room so this is a 3-bed, 1-bath upstairs and it had a- and I think we might talk about this in the next slide, it had a half bath in the basement or full bath in the basement, but they put- they put concrete in the pipe. They just covered it up and said they didn't want people doing it.

David: Oh, I remember that.

Mike: Yeah.

David: This is  El Dorado right?

Mike: El Dorado, so you see- and then they have that ugly wood panel in the rest of the basement. So yeah, go on to the next slide, you'll remember it when you see it Dave, it's- yeah.

David: All right, yup yup. Alright, moving on, moving on. Purchase details and plan, we purchased this guys for 59 thousand dollars. Again, this is back in 17', we're starting at the beginning, we're gonna be doing a lot of these case studies. So, this one was a couple years back, but it was again, this was what? number four? that we had done as a team here. So again, purchased it for 59 thousand and we used private money, private lenders. We estimated the 45 and 45, that's days to complete rehab and then days to complete our refinance. Now, if you're working with a lender that requires some seasoning, meaning it needs to be- needs to be leased for at least let's say 60, 90, maybe even 120 days, then make your projections based off of that, right? Our plan and goal was gonna be a little different than what you're plan and goal is so, you know, figure those out and make those projections accordingly. At this point in time, we already had a lot of lenders in place and again, our goal was the 45 and 45. Now we estimated a 19 thousand dollar repair budget on this one with a hundred thousand dollar value when we complete, and we had estimated a $1,200 a month in rent based upon those estimates, okay? So the rental rehab plan, 19k rehab budget. What were we gonna do with that? Well, we wanted to flip up the kitchen a little bit, save the cabinets and paint them, okay? cuz they didn't look like they were broken or too beat up or kicked in, they just dated looking. This is a rental.

Mike: A lot of old houses have solid wood cabinets, but they're just old.

David: They're just old.

Mike: So if they're not treated bad, if they're in decent shape, it really is tough to rip them out and just throw them away and put in new cheaper cabinets so again, we try to save a lot of times if we can for the BRRRR properties.

David: Yup, absolutely. I love it. We did do the new countertops and we bought new appliances. Those are two things that it's really hard to update. You can't update appliances like by fixing them or I mean, they just get old and you have to throw them away, so you buy new ones. Countertop, same scenario, they get old, they fade, they get chips and maybe peeling if they have like some sort of laminate or vinyl on it, what not. They just look bad after about 10 years so we just replace those and it's relatively cheap. We did do new flooring throughout the house which goes a really long way guys. Think about the flooring and the walls. I mean, that's what the majority of any property is. It's the floors and it's the walls and then so if you can update those, paint them, clean them, sand them, stain them, it's going to make the entire house look a lot cleaner and more updated just by doing those two things, so we did flooring and we did paint. We repaired the basement bath which again Mike had stated it wasn't workable cuz there's concrete poured- did they pour it in the toilet and then flush the toilet?

Mike: No, it was just-

David: I can't remember exactly what it was but I remember that we had to dig it up.

Mike: Yeah, and it wasn't a big deal though cuz I was like, oh man, we we're gonna have to bust out all the pipes but they ended up- it was just like-

David: It was only like 4 inches beneath the thing.

Mike: Yeah, exactly, there was like nothing so they-

David: I think it might've been.

Mike: They just dig it up and chip it out.

David: It might have been either somebody that got foreclosed on or a tenant that was getting kicked out that was just like f this owners.

Mike: I don't know man.

David: Who knows? That's kinda what I would think but regardless, we did have to fix that basement pipe and we had a bathroom that was non-workable, did we make it workable or did we just remove it and then made it workable?

Mike: Yeah.

David: Cuz that helps your appraisal guys. That's something to-

Mike: Your appraisal, your rent, your livability.

David: All of that, that's such a good point. So again, clean and paint, new light fixtures and we brought it to code. Now, one thing I do want to mention Mike is that adding light fixtures goes a long way. Light fixtures are relatively cheap and if you have ceiling fans in your bedrooms, or you know, just these old light fixtures in your kitchen or your bathroom, swapping out a light fixture cost anywhere from $40 to maybe $250 and it will make a home look much more updated by doing that than not. Go ahead.

Mike: Yeah, and I would say that we  put ceiling fans in every room and we're very picky about them. We get inexpensive ones, but we like the ones with the light bulbs where you can put three or four light bulbs in it as opposed to the new ones with one little LED light that's got a globe over it, they're dark.

David: They're dark.

Mike: So again, Dave's point about updating-

David: Bringing the light in.

Mike: Yeah, making it bright in the house and adding a ceiling fan. It's amazing, little things like that just makes such a big difference in these properties. So let's go ahead and take a look at the next slides.

David: That was the rehab plan guys. Here's the image after we redid the floors, redid the paint. Look how good this picture on the left looks. I know it's just a picture of an empty room, I get it but when you paint the walls like a gray color and you do white trim on the floors and then you paint the windows, I mean it just looks clean, it looks nice. So here is a picture, it looks like of the newer countertops, we're doing Ashland right? No, this is El Dorado. New countertops and then look at the bathroom. Now Mike, we had a picture a minute ago of a bathroom very similar, it had-

Mike: There's blue.

David: That blue tile. So guess what? We didn't go in, rip all that blue tile down and put this nice fancy white tile in, that bathroom looked just like this one. We glazed it which essentially is painting it with a very thick, very durable paint. You can also use this glaze on the tub, so you can- I can see in this picture brand new toilet, brand new vanity, brand new flooring which typically is like a peel and stick or even a groutable peel and stick. We don't really do anything ceramic guys. The reason is because ceramic brakes.

Mike: It's two reasons. One it breaks-

David: It's expensive for two.

Mike: Well, okay three.

David: Three yeah.

Mike: It's expensive, it breaks and it's harder to install.

David: It's harder to install, takes longer.

Mike: So, you need a tile saw.

David: You need more- you need a tile saw.

Mike: It's more skill.

David: You need more skill, right. Whereas we did- for these rental grade properties, we like to use very durable flooring and something that somebody can essentially lay down and cut with an exacto knife or whatnot. I mean, it works really really well, maybe we can finish it with cord around, maybe you don't, it doesn't matter but again, you can see the updates that we did in these slides here, some more after photos. This was that basement bathroom, look at that on the left side. I love it man.

Mike: That's the basement bathroom, yup. So, it's a 3/4 where it has a shower not a full bathtub down there but again it's great.

David: It doesn't look like we did much to the shower, is that new or no?

Mike: No, we just literally just chipped out the concrete.

David: We just cleaned it up.

Mike: Yeah.

David: Put in the vanity, painted the floors and the walls. This is a perfect example of that peel and stick tile that we use guys or maybe it just clicks together.

Mike: Yeah, the luxury vinyl.

David: The luxury vinyl, I mean, we're getting this for what? 1.70 to 2 bucks a foot give or take?

Mike: It's about 2 bucks now.

David: Call it 2 bucks a foot, but the cost to install it isn't 2 bucks a foot, you know it's somebody that was on the team, on the crew and we're just paying them hourly so it's much much much more cost-effective. Let's look at the results Mike. Go ahead.

Mike: Sure, so this one we spent quite a bit on, we spent 21 thousand dollars on it. So again, since we got such a good deal when we purchased it, it means we were into this property for 80,000 and I believe our expectations were it was going to be worth about a hundred when we were done. So, we were expecting to be worth about a hundred, we ended up spending 21, we're at 80 thousand dollars. So, eighty thousand over a hundred thousand that's 80% so we'd be okay even if it just appraised at what we expected it to. What actually happened, it appraised for 118, so we captured $38,000 in equity. This is what's so fun about BRRRR is we're creating value for ourselves using someone else's money.

David: Yeah, so we created 38 thousand dollars in value by buying something at a discount and then fixing it up and then getting it rented. So we take that to the bank and we say hey look, money's coming in, it's cash flowing right? Here's what it's going to be worth, what kind of loan are you going to give us? They send the appraiser out and they give us loans anywhere from 70 to 80 percent and this part of town, we're probably getting 80% loans I'd imagine. That's the majority of the loans that we're getting is 80% but again Mike, I love it, we captured 38 grand worth of equity. Let's take a look at our results, not only did we capture 38 grand worth of equity, but we are cash flowing. That's not right, that's-

Mike: No, that's wrong. Go back to the last slide.

David: That's an annual cash flow probably right there, right?

Mike: Well, 290- I don't know, doesn't matter. Just leave it on this slide for the end here.

David: Yeah, that's fine.

Mike: Rented at 1200 a month, $290 per month.

David: 3480, I just did the math. That's the annual amount.

Mike: Gotcha.

David: So, its 290 a month, no problem though.

Mike: Well, it's again, it's relatively low for our portfolio. When you're that low and again be very very careful, make sure you are accounting for vacancies, make sure you are accounting for maintenance, property management, etcetera etcetera. Make sure you're counting for all these things when you're trying to calculate your cash flow. So our 290 is a true 290 or it's a pretty accurate 290 I would say which is difficult and it's difficult for a lot of new investors to really get that. If you're looking at just your mortgage payment and the rent and the difference between those two you're probably not actually cash flowing 290 because there's gonna be maintenance, because there's gonna be repairs. Repairs are huge. We have about 100 or so, a hundred and something doors, I don't- I can't even tell you how many air conditioners I replaced this year and if we didn't factor in the fact that we were going to spend money on maintenance, it would crush us, like it would just crush you, so you have to have to have to account for that, like our actual bank account, we're probably making 400, 500 a month on it but because we take those factors into consideration, we only live off of 290, we only call it 290.

David: Hey real quick before we proceed.

Mike: Let's do it.

David: I wanna answer this quick question here.

Mike: I love it.

David: It's from Brian, it says: how do you take the money out if the bank is not allowing people to take the money out of rentals? So, we're not taking the money out, this is not a cash out refi Brian. This is a refinance that pays back another lender, so you have to think whenever we go to refinance, they're going to say hey what all loans and liens are on the property and we're going to submit the existing current debt, so what the goal is here is to not walk with 5, 10, 15 grand although that can happen and occasionally, the goal is just to have your 80% of appraisal to be at or above what the debt is and therefore you're not cashing out, you're just having the bank replace one debt with another, but the new debt, bank loan debt is long-term, low interest rates.

Mike: So there's- and again, there's a couple things on that too. So David is actually right and it's considered more of a rate and term refinance or it can be if you've had the property for long enough. It's a rate and term refinance, not necessarily a cash out refi. You also though, if one back tells you no, and this is something we kind of skipped over, go to another bank.

David: Right.

Mike: So, this is something that we emphasize.

David: You can learn a lot about it in our book.

Mike: We emphasize it in this, is that one of the most important things people don't realize about the BRRRR method, before you get started buying, go get pre-approved. You have to talk to three, maybe four, maybe five lenders, figure out how you can get approved before you buy the property. That is really really important and if you didn't, no big deal, but start hunting down local banks that are willing to lend. We prefer commercial loans because we can get loans in our LLC and there's no cap on it. There's not as many restrictions, the rates aren't quite as good. Again, we're going to pay a little bit higher interest rate but again, it gives us the ability to do this.

David: Yeah, absolutely.

Mike: So like, it doesn't- it doesn't matter and you're using someone else's money to pay it.

David: Cool.

Mike: So, yeah that's very very important. I'm glad you saw that question and asked about it.

David: Alright, let's do one more guys, one more. This is 1632 Langholm, this will be number 5 for today. Again, we are doing case studies on the BRRRR method. 1632 Langholm is the property, this is the fifth property Mike and I did together.

Mike: Dave, you bought this one, tell us about how you found the deal, you remember?

David: Yeah, so check this one out. You know man, I don't remember how I bought this deal, it was a while ago. We've had this one for-

Mike: I know you were the buyer though man.

David: I did buy this deal, I remember that.

Mike: So, this when we're heavy into wholesale but Dave I remember was-

David: Yeah, but I like this deal and here's why I liked it: it's a four bedroom house, all four bedrooms are on this right side and then you had a huge family room right here, and then a dining room in the middle and then a kitchen in the back and it had a fenced-in backyard. It just had a good lot. This is a photo taken in the winter cuz the grass is all dead here, but it just had- it had a lot of potential to bring in a lot of rent and I also noticed that it didn't need that much rehab. So, you can see, here's when we bought it. I know that we did new flooring in this house, we did new countertops and we did new paint. I'm pretty sure we left the cabinets, but I could be wrong and again, I think we painted these bricks here.

Mike: You're working too hard man, go to the next slide.

David: Paint and flooring go a long way with rental properties guys, paint and flooring.

Mike: Look at that memory.

David: So, I know I'm working hard here. Purchase details, we purchased this again, this is the fifth one we bought. Mike and I have over a hundred doors at this point from the BRRRR strategy or damn near close to it. This is the 5th one back in 2017, 79 thousand and change was our private lender purchase price. Again, 45 and 45 was the rehab and refinance estimated, that's kind of- it was our goal, and then again we estimated about 15K in repair budget, right? and we were hoping with a 80 thousand purchase and a 15k in repair, that puts us at about 95, that it would be worth 119 and that's also with an estimated rent of 1200 a month, so let's see how we actually did on this deal. The rehab plan real quick, it was in good shape, it was a mostly cosmetic flip or renovation you should say. We did save the cabinets, we did do the new floors, I remember those floors. We did new flooring throughout, we did a bathroom fluff up, I think two of them even. Paint, clean and then of course bring it up to code. That's one of the things that you always have to do when you're doing your renovations because you can't get a license to rent it, which basically means you have an occupancy inspection pass.

Mike: Yeah, so here in St. Louis, we have-

David: Without bringing it up to code.

Mike: We have a ton of different different municipalities and each one of them kind of has their own different little requirements, unfortunately they say they're all the same, they're pretty similar but it's a little bit different, but you have to get an occupancy inspection and an occupancy permit to move into most of these properties, so that's why we're-

David: Right, it's for a good reason.

Mike: It is, it's safety.

David: It's for safety.

Mike: Well, the intent is good.

David: Intent is good, sometimes the inspectors are-

Mike: Are thorough, we'll put it like that, they're thorough. So, we bring everything up to code, again, we want to make them safe, clean, nice places to live, that is always our goal.

David: That's right. Alright, keep it moving here. So, here's some after photos. Guys, look how pretty those floors look. That's $2 a square foot floor from I don't know, Home Depot or maybe hoods but it looks so good. That is not real wood, doesn't matter. That's also more durable than most floors, maybe not wood itself, but maybe depending on how you treat them.

Mike: Personally, I think it is.

David: It might be man. I mean, really they don't scratch and/or dent like a wood floor wood and they're waterproof which is so cool, right? I guess wood isn't waterproof so it's more durable than wood. Looks like wood, I love it. We kept the cabinets guys, we did do new countertops and it looks like we did a new light fixture. I thought we painted those bricks, but I guess we didn't, we painted the walls though. So again-

Mike: Yeah, but look at it. I mean the picture looks great dude.

David: Yeah, you're right. The night and day difference from the before and after is great. Let's take a look at what we really spent. So, we guesstimated a little less than I think it was 16 or something along those lines. We ended up spending 20 on the repairs, but that totally put us in at 102,998, that was what we are into this loan with our lender, probably with the interest occurred already, right? Like at the time of refi, we owed 102,998, we did get it rented for 1250 a month, which brought us $456 a month in net cash flow after all of our expenses, alright? It appraised for $130,000 for an equity capture of 27 grand. So, it appraised for 130, but we owed our private lender 102,998 so we had that equity capture of $27,000 and some light change right there with a monthly cash flow of $456, alright? Looks like we do have some- a property image of the photo, but we kind of already seen that one but again, just another great example of what we can do when we apply the BRRRR method guys, the BRRRR method, buy, renovate or rehab, rent it out, refinance it, repeat it. It gives you the ability to buy properties with little to none of your own money by using private or hard money lenders, fixing those properties up, taking those properties and putting them on the market for rent or hiring a property manager. Mike and I are too busy to be renting our own, we have a manager that does it for us, he goes and rents those properties. Once we have that lease, alright, we have some before and after pictures, and we can prove that we rehabbed and updated this property, and some banks will have a minimum. They'll say we want to see at least 15,000 worth of updates if we're going to lend on the appraisal and the appraisal only and that's fine. We typically- I think our average is what? 17?

Mike: It's- Yes, I think 16 or 17.

David: 16 or 17 grand on average for about a hundred rental properties, right? or a hundred doors let's say, about 16 grand per property, we take it to the bank, we say, hey we want to get a refinance loan, this isn't a cash out, it's just paying back another lender or another bank or even another institution, right? And as long as we can get you know at or above 75 - 80 percent of what that appraisal amount is with our all in cost, we can pay back those private lenders and have none of our own money in the deal. Now to be completely transparent, we leave money in these deals. Typically, it's about 1200 bucks on average over the course of all of them that we've done. In the beginning, we were leaving in 15, 10, 12, 18 grand because we didn't know how to zero this in exactly, right? Maybe we weren't buying low enough, maybe we weren't adding enough value, couple different things may have happened to say why we will be leaving money in, but every deal we do, we're getting better and better and better. We're making sure that we're not underestimating our repairs, we're making sure we're buying it aggressively at a discount to ensure that whenever we get to the closing table on the refi that we bring zero or as close to zero as possible. Now, full disclosure, we have walked away from deals with money in our hand before, probably five or eight times. We don't like doing that though because we don't want to increase the debt. The goal here is actually zero if that makes sense at all. It's to be in and out for none of your own money and if you have to leave a little bit in that's fine, but would you like to acquire a rental property with $1,200 out of your pocket at the end of the day? It's about what we're averaging right now, $1,200.

Mike: I mean again, what price can you put on it? Compare that to-

David: And then after 4, 5 months of cash flow, you'll have none of you're own money.

Mike: Well, compare that to the traditional method: save up, save up, save up, put 20 or 30% down. So, think about $100,000 property, you're talking about leaving $30,000 of your own money in it.

David: 20-30 grand and it's hard to save 20 or 30 grand too, right.

Mike: Dude, good luck, like are you kidding me?

David: Right. So this is it guys, this is why we do it. We love doing it.

Mike: It's creating wealth.

David: We just did 5 case studies: 555 Benne, 2477 Ashland, 560 Jamaica, 290 El Dorado and 1632 Langholm. If you are just now watching scroll back, rewind, check these out, these are case studies on the BRRRR method deals that Mike and I, this is real life case studies that we did on properties and we're going to be bringing you guys a lot more of this to come. Thanks for watching. Signing off.

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