Updated about 8 years ago on .
Reverse engineering good deals using BP calculators
I'm sure there are posts on this and I'm not searching under the correct terms, so apologies if this gets asked all the time.
Quick history: I found the BP podcasts and website via "The Book on Rental Property Investing," which I downloaded a few months ago. Prior to that, we had two condos that we lived in, then rented out, and eventually sold because cash flow wasn't good. For our next deal, I am leveraging the tools on this website pretty hard.
One way I use the calculators is to "reverse engineer" or "reverse analyze" deals. If you take a BRRRR for example, I use dummy data to see what price point I need to buy at to get the returns I want. Example scenario: There is a neighborhood of SFHs that are, on average, $150K. Rents for similar houses in the area go for $1500. To pull these rents, I think I need to do $15K of renovation. If I know this, I can back calculate, using the BP Tools, that I need to buy this place at $60K or $70K to get my cash flow target. NOTE: I haven't run this scenario, it's just for discussion.
Am I missing something by doing this? I am still a newbie at the real estate investing game, so I can't identify reasons why this type of analysis could be bad (assuming that more in-depth analysis is completed when identifying actual buy targets).
Thanks in advance for your input and advice!
-JP