A couple of weeks ago I posted “My First BRRRR: By The Numbers”, which focused on breaking down all the numbers associated with the purchase, rehab, financing, and more for my first BRRRR in Oklahoma City. Now I want to share with you the lessons I learned from the process.
Once you read the article send me a message on Instagram @honorandequity or email me at email@example.com and share your thoughts!
Lesson #1: It will take longer than you think.
I estimated 6 weeks for the rehab, and it took nearly 7 months! We closed on the duplex on December 10th, 2020, only two weeks before Christmas. After closing, the focus was on the rehab. I knew from the thorough inspection we had done that the property needed mostly cosmetic updates, such as replacing the exterior fascia and trim, new kitchen tile, a new wood porch and railings, and new gutters. It also needed some minor foundation work. In my optimistic, BRRRR-beginner state, I thought it was possible to get everything done by the end of January. However, because of the holidays, we didn’t even get started on getting bids until the beginning of January.
Lesson #2: Don’t expect much to get done during the holidays.
The winter holidays caused the rehab to get off to a slow start. In hindsight, I should have anticipated this, but at the time I didn’t think the impact would be so significant. Lesson learned: don’t expect much to get done for the last two weeks of the year! I should have added roughly 2 weeks to my rehab time estimate to account for this, and I will do so in the future.
Lesson #3: Get bids for everything early.
One mistake I made was not getting a bid for windows earlier in the rehab process. Windows were one of the last things we got bids for and once we decided on a company, they told us it would be roughly 8 weeks until the windows would be delivered. 8 weeks. That’s more than I thought the entire rehab would take! This was partly due to COVID’s notorious impact on the worldwide logistics chain, which I did not even consider at the beginning of the rehab. If I had known this, I would have done the window bid first and gotten them ordered much earlier.
Lesson #4: Your private lender is priority #1.
I wasn’t overly confident that anyone would be willing to give me $120,000 to do my first BRRRR. Sure, I had done a copious amount of research on the subject, including reading books and consulting with experts in this area, but this was my first attempt at completing one myself. Someone did though (my sister-in-law), and I knew that whether the BRRRR was a success or not, I would get her that money back plus interest. That was more important to me than anything else. I didn’t want to be known as the person who doesn’t follow through. Leveraging other people’s money is an important part of real estate investing, and I knew I needed to establish a solid reputation from the very beginning.
Lesson #5: Don’t be too hard on yourself.
I set pretty ambitious goals for myself on this first BRRRR: 20k rehab (it went 5k over), 3 month rehab time (it took more than twice that long), 156k appraisal (it appraised for 161k! Yay!). As the rehab went over budget and over time, I was pretty hard on myself. I had to remind myself that this is the first time I’m doing this, with a brand new team, in a new location, so it’s totally understandable that I didn’t flawlessly execute my goals. Ultimately, the deal was a success, provided a valuable learning experience, and it wasn’t as difficult as I thought it would be.
One mistake I did make was not recognizing that the mortgage refinance was not a fixed rate for the duration of the mortgage. It was fixed for 3, then variable. My mortgage broker told me this early on, and for some reason, I thought it was fixed for 20 years. When I was reading the documents at closing, I was caught off guard by this but after searching my old emails and I found that I had just overlooked that fact.
Whenever you’re trying something new, give yourself some grace.
I firmly believe that if you aren’t making mistakes along the journey of life, you aren’t setting your goals high enough and you’re not taking enough risks. When you look back on your life, do you think you’ll regret NOT trying big things? We’re capable of so much more than we think, so set your goals big, give it your best effort, and keep learning and improving!
What lessons have you learned on your real estate journey? Comment below! If you’d like to connect with me, you can send me an email at firstname.lastname@example.org or send me a message on Instagram @honorandequity