Built-to-Rent (BTR): The saga of how we turned $90K into $1.5M

It's not for everyone.

Sometimes you'll want to bang your head against the wall.

We started building during the dead middle of the pandemic.

With supply chain issues. Labor shortage. Lumber prices skyrocketing.

It feels like you’re making a thousand choices every day.

You have to be so detail-oriented and every choice matters.

You have to know your number so well and pivot as you manage the budget and timeline.

Decision fatigue is real, y’all.

But it is a strategy that worked to get not just one but both (!!) cashflow and equity in the hot market of Austin. What is it that you ask? It’s Built-to-Rent (BTR) strategy!

The original house on the lot with illegal extensions, mold, and unsafe walls

(I think there was someone living in the bathroom 😬)

So here’s how it all started: I zoom messaged my business partner Valerie during the state of the economy market update webinar hosted by Open House

(is this our meet-cute story?!)

During 2020, I went fully remote from my Data Scientist day job and I was BORED.

Screeching halt to my social life was definitely catching up to me as I only had my dog Tater to talk to.

I was committed to buying something in Austin because I believed in the economic future of Austin but everything was already too overpriced and no sign of cash flowing.

I was researching and underwriting for different scenarios -

What if I buy a house that needs a heavy renovation and rent it room by room?

How about if I buy a plot of land and put multiple tiny homes for mid-term/long-term rentals?

Could I buy a duplex or triplex somewhere up north or south, heavily renovate, and Airbnb?

None of them made sense.

Not because it didn’t cash flow but because I would have to trade my time for money with renovations (or zoning didn’t make sense) for most of these scenarios.

I also wanted to do things by the book and not jeopardize the future of these investments with ever-changing Austin politics landscape.

I knew from experience that I’ll have to manage the renovations even with a GC (again, you have to manage the managers) and that means I have to be on-site every single day.

Our first 3-D design rendering with the architects  

I wanted to design my life that made sense for me.

That meant I had to find a new way to make it work for my life.

Enter residential infill development.

I met a developer who briefly told me what it was like to build in Austin.

Even though I’ve never done anything like that, I feel like I could figure it out.

My underwriting shows that if we keep the budget under a certain amount, the completed ARV reaches a certain threshold, and manage the timeline to account for carrying costs, this project would make both a very handsome built-in equity and great cashflow from Airbnb-ing.

When we toured the lot, it had a tiny old house on it that we thought about renovating but the highest and best use was brand new development and we went for it.

When we got it under contract from MLS, it fell out of the contract, went with another developer, fell out of contract then came back to us for $50K less.

Me and Valerie closing on the lot during pandemic

We assembled our dream team by interviewing at least 3 companies for each:

• Architects
• Builders
• Permit Expediter
• Structural engineer
• Civil engineer

We also hired zoning/due diligence researcher that came recommended to us since a lack of due diligence on the lot could mean getting permit delays for months (like buying a historically zoned lot, floodplain, or anything else that might hinder easy permitting).

With our builder Patrick on our newly demoed site

We got a lot loan, then rolled that into a one-time close loan (which combines construction and permanent loan into one closing so low closing cost and the rate locked down from the construction which was HUGE for us).

This strategy worked so beautifully because:

• we put down 15% of the lot initially ($400k lot so we put $60K or $30K each per partner)
• after the permit was approved, the bank did as-completed appraisal based on the plans and budget and that appraisal came back so high that we didn’t need to bring any more money
• the only thing to account for was carrying costs until development project was completed

HOORAY 🎉

In another post, I’ll lay out in detail the costs, how I’ve underwritten, and how the numbers panned out, and what we’re doing now. Stay tuned!

Unit A Living room - we love the wall slats as an accent wall! 

We also recorded a podcast detailing all the lessons learned and our journey if you want to listen instead by clicking the button below