Flip/BRRRR Carrying Costs Strategy

[Kevin Reinell]

I have a partner that I am taking down a STR with and we are planning to use hard money to fund purchase + rehab, exit out through a refinance most likely. My question is how do flippers or others experienced with BRRRR handle the heavy interest + carrying costs during the time of rehab? Is that expected to all come out of our cash reserves? Or are there other strategies for handling the hefty monthly carrying costs (interest, taxes, utilities etc.)

Curious to see how others handle this.

Thanks!

[Jake Wiley]

I've always viewed the carry costs to be a part of the investment/renovation and budget when running the numbers.    When you include them upfront, it keeps you honest on the real opportunity.    There are a lot of folks out there that talk about the investment, the cost to renovate vs. the end value, and the difference being the gain, but the hold period costs are real.   Anything that is not paying down principal is a true cost and needs to be considered in the investment planning upfront.   This also keeps you very focused on timelines as well, as you are burning cash during the hold and if it was a part of your budget upfront, you see the dollars going out against your budget and will be more inspired to keep things on track and not let contractors dictate the timelines so much.