“As soon as I saw you, I knew a grand adventure was about to happen.” – Winnie the Pooh
The first of anything is pretty special — first kiss, first car, first born (although… don’t mention that last one to my younger sister – lol). The expectation and excitement and nervousness when taking on something new are like no other experience. It was no different with the very first renovation project under the R.E.A.D.I. Partners name — The Jefferson.
This project was sourced through a local wholesaler we had known for about a year. A number of opportunities for wholesale assignments had come across our inbox during that time. We tried to move on a few, but they were always snatched up too fast! Frustrating for sure. It was a positive sign though. If the ones we were interested in were going that quickly, we had confirmation that we had the skillset to know what a solid deal looked like.
The Opportunity
The Jefferson came to our attention just before Thanksgiving. We had actually started inspections on another property when the wholesaler mentioned that we might be interested in the townhome. So we checked it out.
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It was stunning! Located in a well-maintained townhome community, this 2 bedroom, 1 1/2 bathroom 1300 sf property was an absolute dream rehab project for a group of first time real estate investors. Built in the 1980’s, it still had the original popcorn ceilings, gold plated fixtures, toffee colored cabinets, and sinks in the shape of shells in the bathrooms. Its outdated style provided great value-add potential. Its 80’s quality construction protected us from having to deal with the complexities that could arise from 70’s and earlier construction issues (e.g., lead, asbestos, rot, mold, faulty wiring, old pipe, etc.).
The community had a pool, clubhouse, and gate access. Plus, the neighbors were really friendly 🙂 Additionally, it was within minutes from a ton of recent retail development, as well as the campus of LSU Health Shreveport.
The Strategy
The asking price was $80k, but we offered $75k. We assumed there would be about $25k in rehab costs with a potential ARV of $120k. Our business strategy was to employ the BRRR method – Buy, Renovate, Rent, and Refinance. With an assumed LTV of 80% for the refinance, we’d be about $5k out of pocket and collecting about $1200 per month in rent.
Our offer was accepted and we were all set to close December 18th. Yay! Rehab was to start the first week of the new year. Our goal was to have our first tenant in place by March 1st. We were going to secure financing through a hard money lender for most of the purchase cost and 100% of the renovation expense. The same lender even offered great terms for the refinance after the 6 month seasoning period had passed.
If only things went that smoothly!
Curious to check out all of the wonderful lessons we learned about best laid plans? Want the scoop on all the lucky breaks that we stumbled upon along the way? Check out part 2!
