BRRRR thoughts and stuff to keep in mind!
We discussed this in the office, so I thought I'd write it down. Something to keep in mind when running the numbers on BRRRR property:
1. Rent after the renovations is a key number to have dialed in. The rent will determine cash flow, and cash flow will determine how much cash you can pull out on Refi. Check and double check that number.
2. Do good renovations. You are essentially flipping this property to yourself, so you will have to deal with any cut corners down the line.
3. Leave some money in the deal is an option. I have heard of some people pulling out cash until the property runs at a 10 CAP. I think that's brilliant and a healthy way to think about it.
4. It's not a bad BRRRR deal if you leave some money in it. If you can secure a fully renovated property for 10% down instead of 25%, that's a win in my book.
5. If you take the thought in number 4, you could rate BRRRR on the following baseball scale:
Homerun: Zero money left in the deal.
Triple: 5% down payment left, still great.
Double: 10-20% down payment, good.
Single: 25% equity left in the deal. Bright side, you now own a nice building with hopefully all the problems solved.
Musing for the day, lemme know what you think!
Dang it, meant to put that in BRRRR forum, someone move it plz!