Who Says Work Doesn't Get Done While In Mexico?
The BRRR Method Explained
My wife Mori and I were on vacation in Puerto Vallarta, Mexico when I saw an email come over for a new deal. I've been looking for a property for my client Kurt for a while now so when my birddog partner sent this over I knew we would have to act fast.
I got on the phone with one of my team members Brooke to get over to the property as fast as possible to scope it out. Within about 15 minutes of getting the email, Brooke was in front of the property and told me it was a go. It had everything my client Kurt was searching for and more. It's in a great location, in his budget and minutes from my office. I called Kurt, while lounging by the beach, and told him about the property, gave him all the details and he was in.. We made a few more phone calls and sent several emails back and forth between us, and by mid-day the following day we had wired money and closed on the property, all while I was still on the beach.
Now I don't advocate to everyone "sit on a beach to get your work done" but years of experience, trusted connections, and an amazing team were definitely in my favor this time around. The property details are below and I'll be sure to include you on updates as we get things completed. Right now this property is about 50% done, the before pictures are below- it was nasty. I'll send out fresh pictures with updates on our progress in the following weeks.
You may have heard of this really fancy new acronym floating around investments groups BRRR. Well I’ve used this since 2003, and that’s what we’ll be doing on this property (Buy - with cash, Renovate, Rent, Refinance – and pull all the cash back out that’s possible). The concept and reason for this strategy is buying bargain priced homes, that probably need some renovation, where an ability to close fast is what makes them such a great deal. Then after it’s renovated and rented it will appraise much higher than we paid, and so now we’ve bought both equity and cashflow rather than paying full price.
This strategy is what we intend to do here. Upon completion of our renovation, I expect Kurt to have about a 7.4% ROI on the cash investment after all costs of ownership and management – nothing to scoff at. However, once he refinances and pulls most of the cash back out, with a very modest estimate of only 3% appreciation, I expect that ROI will jump up to well over 25% - because we bought him equity he will be able to leave a minimal amount of cash parked in the home and gain appreciation and all the tax benefits on the full leveraged value of the home. DISCLAIMER – I’m not a licensed financial planner or investment advisor. I am an Investment Real Estate Manager, and for me, ROI is the whole purpose behind rentals.
- Trash Out
- New Roof
- Demo Walls/Build Walls
- New Bathrooms
- New Kitchen
Renovation Cost and Budget:
- Purchase Price: $239,990
- Estimated Home Value: $320,000
- Total Renovation Budget: $55,000
- New Rent: $1800/mo
- Estimated ROI: 7.42%