What is a good ROI for a BRRRR? I know people use CoC which is great but if I am getting 100%of my money back out, how would I calculate a good return? Here is the info on the potential property:
Purchase- 50k
Rehab - 30k
Holding - 8k
ARV - 120k
Rent projection - 950/mnth
I would refinance 90k to get my money out which would make the mortgage around $635 a month PITI.
If I did a normal ROI calc I would only have around a 4% return. But cash flow would be $300 a month.
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
5y
Other than bragging rights, what does it really matter? That said, your best measure of return will be against the opportunity cost of this investment.
Also, your cash on cash return should properly include reserves for maintenance, vacancy and capital expenditures (and property management unless you self-manage). Assuming 20% holdback for these expenses, your cash on cash is actually about $125/month.
Rental Property Investor · NJ and PA · Member since 2019 · 206 posts · 105 votes
5y
IMO, once you've got your investment out, any positive cash flow is a good BRRRR -- as long as your out estimates are conservative and you have sufficient reserves to deal with unexpected expenses. You own a property with no cash of your own in, and every month your equity grows.
A caveat, though... You generally don't know for certain you'll be getting all your cash out -- you don't know exactly how it will appraise after rehab. If you do your analysis based on a low guess on the ARV and a high guess on expenses, is your CoCR acceptable? If so, you're good.