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What's going on, everyone? Welcome to the David Green show. We're going to be doing something a little different today. I don't do this very often, but I'm going to take a stab at making a walkthrough video of a property that I recently bought in Oklahoma. Now, in full transparency, I don't think I'm very good at stretching these videos out and finding a lot of different things to talk about or talking really slow so that I can hypnotize you into watching 45 minutes of nonsense. So the video might be kind of short, but don't confuse that with not being valuable because I'm going to pretty much open up the playbook and show you everything that went into this house in the spirit of real talk real estate. All right, so let's start with an overview. This is a three bedroom, two bathroom house, 1,260 square feet in a pretty decent neighborhood in Oklahoma. Now I'm told the school districts are really nice and that was one of the things that appealed about the home. It needed quite a bit of work, but not a lot by real estate standards, just a lot by what a non investor might look at and be a little intimidated by. It currently shows a zestimate of about $179,000. I found the property from a real estate agent who had this under contract as a wholesale deal. So she sent out letters through a company called Homevestors which is like a franchise model that she bought into, found a seller who wanted to sell their house and then goes and looks for an end buyer like me. I put the property under contract for $115,000. Now I'm going to walk through the remodel, I'm going to show you some pictures of what it looked like before and after. I'm going to talk about what I did and then I'm going to explain the arv. Here's the thing to take away from this deal. It's not complicated, but let me say that another way. It's only as complicated as you make it. There's not a whole lot of moving parts to these smaller deals, especially when they're rentals. And yes, this is a brrrr. Now before I get into some of the details of the house, I just wanna explain some ideas of a BRRRR stands for buy, rehab, rent, refinance, repeat. A lot of people think that the only way that you made a brrrr work is if you pull out 100% of your capital from the deal. Now I wrote the book on Brrr. I've done a lot of these things. Many people know me as the brrrr guy. I've been called Serbur, the Burger King one, Brad Mofo, the burfict man, David and Burandon Turner. But no matter what you call me, make sure you don't catch yourself calling the only brrrr that works, one that you get 100% of your money out. It doesn't always happen. The goal of brrrr is not to get 100% of your money out. The goal of brrrr is to leave less money in a property than you would have if you'd bought. Now, when you buy a property, traditionally you're going to have to put a down payment on the house. It's almost always a minimum of 20%, sometimes more. Then you're going to have to put sizable amount of money into the rehab. In this case, it ended up being $30,000. The problem when you're buying fixer upper properties is that not only are you putting in the down payment, but even worse, you're putting in the remodel. As I said, I bought this property for 115,000, so the down payment would have been just over 20 grand. But I put $30,000 into fixing it up. In this case, the money for the remodel was 50% more than the down payment. Now here's the good news. I added a lot of equity to this deal and I grew my net worth. The bad news is you run out of money when you buy properties like that. The brrrr method is designed to get more of your money back than you would have left in it. If I'd bought this house, traditionally it would have been over $50,000 that got left in the deal. But because I did the brrrr, I get to choose how much of my money I get out of the deal. And I just say that because many people will watch this and say, why would David ever buy a deal if he couldn't get 100% of the money out? It's pretty simple. It's better to buy real estate than not buy real estate. It's better to buy real estate and hold it for the long term than to not do that. It's better to add equity and add value to your net worth than to do nothing. It's better to add cash flow to your balance sheet than not to. And it's better to put your money to work than to let it sit in the bank. So if I have to put my money to work, but I don't get 100% of it out of the deal. Let me just tell you right now, from the Burger King to you, it's okay. All right, let's jump into this thing. We're going to start with a video and some pictures of what the property looked like when I first saw it. All right. As you can see, there are people that are still living in this house, and they have all their stuff in the property. However, my assumption here is whoever lived in the house stopped caring about it and wanted to sell it as quickly as possible. Could have been a landlord with tenants that were living there and were leaving. Could have been someone's own house. I'm not sure. So this is the main bathroom. They kind of cut into their tub there, as you can see a little bit. They put a handicapped makeshift pole right there to help them get in and out of the bathtub. And you can kind of notice in this little area in the middle that the bathtub had been cut out. So probably some kind of an elderly person could step in or out. So the shower is going to need to be redone or at minimum, a new insert is going to have to be put in. I also didn't love the shower tile. The toilet was okay, but those aren't super expensive to replace. These are the three bedrooms. Definitely need new flooring and paint. You could tell from looking at it, as well as new lighting or fans. A lot of stuff in here. Kind of hard to see what you're working with when you're going through these properties. Sometimes can be overwhelming if you're not used to it. You got to watch a lot of these videos. And this is the master bathroom. Good thing I walk all the way in because there is a half bath right behind me that some of the other investors may have even missed. I heard people talking about this as a one bathroom because they didn't see that the master has a half bathroom here, but it's in pretty good shape Now. The house looks really bad because it's cluttered with a bunch of stuff. But what I want you to notice from this is it's not really that bad from what we can see. You don't always understand the structural component of it, but I can tell from going through this thing. The floor needs to be cleaned. It needs new paint. The kitchen needs some work. So let's kind of go over the kitchen again in a second here and slow down a little bit. Also, you got a little weird countertop that separates the family room kitchen nook from each other. I don't really know what they're trying to accomplish here with that thing. But as you'll see later in the video, I ended up taking it out. And here we have the kitchen. So cabinets are looking pretty dingy. Countertops are clean, but they're not all that impressive. You got appliances here. They don't look bad. The biggest issue that I'm noticing with the kitchen is the countertops are actually okay. It's more the cabinets. They need to be either replaced or painted, Especially if you're going to be painting the rest of the property. So the good news is the kitchen's not that big. The bad news is you probably need to do a little bit of work to get the guy fixed up. So this is my before picture. This is what I'm looking at. When I wrote the offer, I think that they were asking about 120 for the property. It had been on the market a couple of weeks, and it had a lot of tire kickers, but nobody had actually bet on it. So I think I offered 110. We countered, and they came in around 115. And I didn't love the deal, but we're really talking about a couple thousand bucks to make it make sense for me. And it was fine. Especially when you don't have a lot of properties out there to buy, when you've got an embarrassment of riches properties everywhere. Yeah, Hold a really firm line on it. But for something like this, when there's not a whole lot of rental options out there, and this is a property that would work as a rental, and I could add some equity to, I was okay paying a couple thousand dollars more than what I had hoped. Okay. The next video is after I've bought it and work has been started on the property. Let's take a look. So, as we can see here, some flooring's been replaced in the kitchen. Houses being taken apart. You can see the backyard here. There's no fence in the backyard. Now, I was okay, because a lot of the houses out there don't have fences. But when I talked to the property manager, they weren't thrilled about trying to rent to somebody with a house that doesn't have a backyard. So this was an expense I was not expecting to have to pay. And it was not cheap. It was quite a bit of money. Believe probably in, like, the 4 to $6,000 range, but fencing all the way across the backyard. But I ended up doing it because the property manager thought that it would be better. And it did look pretty good When I was done there Was also a deck that you can't quite see from here that was in the backyard. That deck had to be removed because it was old and rotten. And we had to add a step going from the house into the backyard. And here you see we've got some replacement work that's being done. Subway tiles being added for backsplash. Old appliances have been taken out. Cabinets still look the same, but the countertop has been upgraded. Flooring is going to be fixed, and the door is going to be painted. Not a whole lot has been done here other than things have been torn apart. And the house has been made very dirty. And we finally got all the junk out of it. So flooring has been removed in the bedrooms where they had carpet. And some big work has been done on the shower. As you can see, a tub insert has been added. A new tile has been put in for the shower. And we got rid of that little handicap pole to help people get in and out. Looks a lot different without everything inside of it, doesn't it? There you have it. So. Oh, and there's your fence. Fence has been added to the backyard. A lot of fence, Brand new. Look pretty nice, though. And then that fence had to be replaced on the side there, too. All right, so that's about halfway through the project, I flew back out to Oklahoma. You don't have to do this because as I talk about in long distance real estate investing, you can have somebody else go to your property, make a video, and you see the same thing that I was seeing right here. I don't have to be there, but I was going out to Oklahoma anyway. I met some friends out there. I was liking the vibe. I had found a church that I really liked. And so I just thought it was nice with the new contractor for him to know that I'm checking on the property and I'm seeing things. But as you can tell, mostly they just ripped out some of the bad flooring. They've done a little bit of work in the kitchen. They did the shower, and then they had to get all the junk that was in the property out. Now our next video is going to be once the work has officially been started and they've made some progress on it. A little bit of Metallica going on. Walls have been painted, baseboards have been painted. Remember that ugly little countertop that was separated in the two areas that's been removed? New doors have been added and they're painting some of the exterior as the interior has been painted and new light fixtures have been put in. It's looking like a new house. We painted the bedroom doors so they look pretty new. There's your bathroom. Painters doing their thing. So with just a little bit of paint and a new shower is starting to look significantly different than when I bought it. Now, before we get into the last video, which is going to be the after, let's talk about the remodel. So a couple things that I learned about buying in Oklahoma. The soil is very shifty, and I don't mean that it's a bad quality of character. It moves a lot, and it causes foundation issues. Now, with this property, I had a structural engineer come out and take a look at it, and they said it was good to go. What I didn't expect was that the roof would have to be replaced. A big hailstorm had come by not long before I bought the property. And these pieces of hail are massive. They literally puncture right through the roof if they're big enough. I wasn't expecting to have to replace the roof When I originally ran the budget for this thing. Without that fence in the backyard and with the roof and the shape it was in, it was going to be about 18 to $20,000 to do a lot of the work that's going to give me paint, floors, kitchen remodel, a punch list of stuff that had to be done. Removing that old deck, fixing some electrical issues, servicing the air conditioning unit, rebuilding that shower, painting the doors, A bunch of landscaping work that the property really needed in the front and the backyard, Removing that countertop area, and then the work we had to do in the kitchen. What I didn't expect was the roof. Now, here's the good news. On a property that's a little under 1300 square feet, replacing the roof was not that bad. I was able to get the contractor to basically do it at cost because I had so much of the other work being done. So in this case, I could get a roof repair for a couple grand, or I could get a brand new roof for $6,000. In this case, for me, I liked it to go with a brand new roof, Especially because Oklahoma real estate people are asking the question, what shape is the roof in? This is not the case in some of the other areas that I invest in. California, Arizona, for example, Hardly anybody ever asks about the roof because it doesn't rain a lot. But out there where they have these crazy storms, people are very concerned about it. So between that and the fence, I ended up about $10,000 more than I wanted on the remodel. Now, some of you are going to say, david, shouldn't you know exactly what this is going to be before you buy the property? In most cases, that's true. And if you're going to be buying from the mls, you have the opportunity to do your due diligence on what the work's going to be. And if it's more than you think, when you get the inspections, you can back out. But in this case, I'm buying from a wholesaler, and that's something you need to know. When you're going to get your deals from wholesalers, you're not going to get the same opportun. I could have backed out of this deal. I would have lost my deposit. But more important than that, I would have burned my relationship with the wholesaler. So you have to understand the position that they are in as well. If a wholesaler tells someone, I'm going to find someone to buy your house, they usually present it to them as, I'm going to go find a partner that's going to buy it with me. And I, in this case, was going to be that partner, even though the wholesaler is not buying the property with me, if she gets burned because I told her I'm going to buy the house, and then I don't, she's not sending me deals anymore. So sometimes you have to weigh that in. How much does your word mean and how reliable are you versus how much more money is going to be spent. Now, in this case, as we're going to hear in a second, there was enough equity in the deal that I really didn't mind having to come in with another $10,000. All right, so looking at the scope of work from the contractor, they're going to charge me $800 to remove all the furniture and the trash inside the house and in the garage, $300 to break down that deck and haul that all off, 700 to put in new sinks, sink fixtures, and supply lines that was going to be in the kitchen. $2,200 to install and buy the materials for the subway tile, as well as new drains for the sink. They're in pretty bad shape. Had to put in new blinds, new smoke detectors. This was some of the stuff on the punch list I was telling you guys about. There's always little things that you don't think about when you're getting a rental. I put two new toilets into the property, replace lights throughout the thing, put new doorknobs on all the doors, painted all the doors, added new door stops, put in that fence in the backyard. Looks like that cost me about 2, 500 bucks. So less than I was remembering in my head. Built the new shower for about $2,500, plus the work that was in the bathroom. Painting for the whole Property was about 30, $200. For the interior, new flooring for the house was put in for $2,200. And then we had some other things like the roof and some electrical work, as well as the AC that came up afterwards. Now, this was a pretty straightforward remodel, and if I had chosen to run it myself, hiring my own subs and finding people, I think I could have got the remodel for even less than this. This part of the benefit of having a GC that does your work is you get your time back. And I'm a pretty busy guy. So many of you could be looking at this deal, and I bet you could have got the work done for less than me. Especially if you're local to the area and you know the people and good on you if you can pull it off. I'm never going to hate. But for me, bouncing back and forth, this being the first property in this state that I've ever bought, it didn't make sense for me to try to do all the work myself. So I ended up at about $30,000 for this remodel. I bought the property for 115,000. So I'm all in for 145. Now, when we looked at comps, which I had a real estate agent and a property manager whose license look at, we came up with about 195. I felt a little more comfortable saying about 185. Zillow has it at 179. And it doesn't know that it's been remodeled and upgraded, doesn't know it has a new roof, doesn't know about the new shower that you saw and everything else. So I feel pretty comfortable at 185. But it could be 195. Probably is going to be 195 in six months or so. If we do some quick math. I'm all in for 145 if the property is worth 185. I just added $40,000 of equity to my net worth. Now, I know the question everybody's asking is, but, David, what about the cash flow? Well, let's run some quick numbers on that. All right? If I wanted to leverage the thing all the way, and we're assuming it's worth 185, if I pulled 80% of the value out of this house out, that would be pulling out $148,000. And remember, I'm all in for about 145. If I get an interest rate of 7.5% on investment property loan, that would put my principal and interest at $1035. If I add 50 buc bucks a month for insurance, that puts me at about 1,085. And if I add 200 bucks a month for taxes, that puts me at about 1285. Now the rent was going to be anywhere between 1150 and 1300 for this property. So as you can see, if I pull all my money out of it, I might be losing a little bit. I ended up getting twelve hundred dollars a month when all was said and done. So if my Overall payment is 1,285, but I'm getting 1200amonth for rent, I'm going to be losing 85 bucks a month. So here's one question for you. Would you want to pull out all your money, actually $3,000 more than you put in to lose 85 bucks a month? Some people might take that deal. I mean the extra $3,000 that you pull out would cover that 85 bucks for a while more than the first year. But that's not really the question I'm asking. The question I'm asking is what? I want to lose 85 bucks a month to gain 40,000 to $50,000 in equity. And remember, I'm not going to be losing it forever. I'm only going to be losing it for the period of time I have before rents climb. So as most people would probably look at, that's not a bad deal. However, I don't have to make that decision right now. I've got all my cash into the property. There's no loan on it at all. So I'm currently collecting rent from the tenants. Twelve hundred bucks. And I don't have a mortgage, which means I'm getting about $1,000 a month right now. After tax and insurance, I could do that for six months or so, even the first year and build up some reserves, have six to twelve thousand dollars in reserves. And now the property has paid for own reserves before I do the refinance. Remember, brrrs don't have to be done on a six month schedule or a one month schedule. You can wait and delay to make it work for you. Here's another way that I can make it work for me. I don't have to pull out the full $148,000. Let's do a little adjusting with my trusty Rusty calculator. Let's say instead of pulling out 80% of the ARV, I pull out 70% of the ARV. That leaves me with $129,500. I'm all in for 145, which puts me at a bit less than $15,000 left in the deal. However, my principal and interest drop to $905. That's about 180 bucks less than if I pulled out 80% of the money, since I'm now saving about 185 bucks and I was losing 85 bucks. Conveniently, this works out to where I'd be cash flowing $100 a month. But I left $15,000 in the deal. If I take $100 a month and I multiply that times 12 months in the year, that's $1,200 a year in cash flow. If I divide that by the 15,000 dol that I left in the deal, that gives me a return of 8% on my money. So if I don't want to lose money, I can choose to leave a little bit of my money in the deal, 15 grand and earn an 8% cash on cash return on that money. And remember, I didn't lose $15,000. I left $15,000 in the property. It's still on my balance sheet. It's just not in cash reserves in a bank. It's in equity in the property. So now Instead of having $40,000 of equity in the property, I have $55,000 of equity in the property. But I'm making 100 bucks a month instead of losing 85. This is an option that every brrrr investor has. And I bring this up because there's no one way to brrr. Like Burger King says, have it your way. You can play with these things depending on what you have going on in your personal budget, how much you can afford to lose, and how bad you need that cash flow. The important thing is that equity sits in the property. I love it. Now, I haven't even talked about market appreciation, equity, market appreciation, cash flow, or any of the other ways that this thing could make money. So far, I've made money by buying equity by paying a good price for the property and forcing equity doing the remodel. Had I paid a little bit more attention to what was going on and been a little stricter with the contractor, I could have got that remodel even lower and had a higher return. I'm also getting loan pay down and a tax benefit from buying this property. And then there's all the other benefits of the fact that I met a new wholesaler. They got me another deal. Going to make a video on that one later. And I found a contractor that can do a lot of this work. It also gave me an opportunity to make a video like this so I could explain to the good people like you how there's flexibility within. Brrr. You don't have to break the bank. All right, let's get to the video of the finished product. Floors have been cleaned. Painting has been done. New ceiling fan has been installed. Flooring in the kitchen is complete. Backyard has been maintained and cleaned. Fence is looking great. Kitchen looks brand new. We painted the cabinets white. We put new hardware on them. We have new countertops, a new sink, new dishwasher, new subway tile backsplash, new range hood, new appliances, and a new fridge. New garage door has been installed. Closet's been painted to look clean. New bathroom, nice and fresh. Bedrooms have new flooring and paint. And this house is ready for its new tenant and hopefully increase rents in the future. All right, folks, there you have it. A burr that worked in today's market. Let's recap strengths of this deal. I was able to get a foothold in a new market and meet some people that are going to be a part of my core four. I was able to add equity to the deal right around $40,000, maybe $50,000, depending where the ARV comes in. I have options of how much cash flow I want out of this by deciding how much money I want to leave in the deal. And I have a property with a new roof and very low capex because I've replaced a lot of the things that would break some of the cons. There's not a ton of cash flow. As many of you noticed, it's not quite at the 1% rule. Rent's 1200. I'm all in for 145. So I' above that. I didn't add any square footage to the house to make it worth more. I only improved what was already there. And though it was only $30,000 to do the rehab, that didn't go as far as you might think because I paid a general contractor to have his crew go in there, and I had to put a new roof on the house. So if you're only investing for cash flow, many of you would have passed on this deal. However, I added $40,000 of equity, and if I do that four more times, that's $160,000. I could then sell those properties to another investor do a 1031 and move that $160,000 thousand dollars of new equity plus whatever money I left in the deal into something that does cash flow. So let me know in the comments. What would you do? Would you have bought this property? Would you have done it the same way? Or would you have passed on it because it didn't have enough cash flow? And if you wanted cash flow, how much of your money would you left in the deal to make it happen? Hope this helped. Hope you liked the video and I hope you follow the channel. Make sure you subscribe to the David Green show on Apple Podcasts and Spotify, and make sure you follow the David green show on YouTube. If you're not already subscribed, please make sure you like the video and share it with any other brrrr investors that you might know. And if you've got a minute, check out one of my other videos with more real estate knowledge.