Hello BP members. I'm in the process of looking at properties for a BRRRR. One thing I've found is that my initial, subjective assessment of a good ARV winds up really not looking that great once I get to the end of my BRRRR calculation. That is to say, I'm losing money after the refinance rather than getting my initial cash back, or profiting. My question is for experienced BRRRR investors, which is - Is there a screening test you all use when looking at a property to determine if the property even has a chance of being a good BRRRR investment? More specifically, are there purchase prices and ARV numbers (ratios?) you look at right off the bat to let you know if the deal should be evaluated further?
I hope I'm asking this clearly. Thank you all for any help and for your time.
@Jim Cellini First a minor correction. If you refinance and don't get all the money back you put in, that does not mean you are losing money. The money you don't get back is still part of your net worth but it is in equity not cash.
I don't know your market. In most markets there will be a sweet spot, This is where you can buy a fixer upper cheaply enough to that after you fix it up, you can refinance , get your money back and still have some cash flow. In my area that is neighborhoods with a market value of $125-150~.
It could be that now is simply not a good time to buy. The market is high right now so those deals will be harder to come by. There is no magic formula. You have to find the right numbers for your market. That means looking at and evaluating lots and lots of properties.
Thank you very much for your reply Ned.