BRRRR IN INDIANAPOLIS

8 Replies

Hey guys, 

I need help. I'm trying to do my first BRRRR (2nd deal this year).

I have analyzing a lot of properties but I am having a hard time getting $200 cash flow per month AND at least 20% COC ROI.

Originally, I was using the following to analyze deals:

-$35k rehab cost (I use this number because that's how much I heard it typically cost to do full rehab on average on indy p1000 soft property if there are no main pipe line or foundation problems. We can't have a more accurate rehab cost until we send inspector and contractor to location) 

property tax =$100 per month (confirm with county)

-insurance= $70

vacancy= 8%

repairs =5%

Capex = 5%

PM fees =$97 or 10%

Should I change anything?

I've been talking to a lot of investors and everybody has their own thought of mind. Some people use 10% repairs and Capex, some people use 5% repairs and 5% Capex, some people use people use 0% cap ex because they already paid for the Capex upfront. Some people don''t use vacancy.

I'm getting confused they all do make sense.

What should be my default numbers going in when first analyzing the BRRRR deal before I send my inspector, contract, PM, and agent to property?

At same time I don't want be to be too conservative with my numbers because I want to close on this 2nd property (1st BRRRR) ASAP.

Again my criteria are $200 cash flow per month and 20% coc return at minimum.  

Please advise.

Thank you guys.

-Jason

@Jason Ma the one thing a CEO does best is makes decisions and pulls the trigger, efficiently and accurately as possible. But the hardest thing is just pulling that trigger.

You're getting data overload too it sounds like. Best of luck.

@Jason Ma your numbers seem good to me. There are multiple views on CAPEX when you are already rehabbing it, so you might have some wiggle room there, but it comes down to knowing the property. Are there areas that you avoided in your rehab or did you truly do everything?

The other thing could be finding ways to increase your rent and ensure you are getting market and not what was just advertised in the listing. I’ve seen both the listing say an outrageous number for potential achieved rent, but I’ve also seem investors, especially out of state investors have rent below market. There are also additional ways to find additional cash flow, implement monthly pet fees (things like that). Even more options in multi family (depending on the property) for garage spaces, storage spaces, etc.

However, I do agree above that you might have too much information. There is no perfect formula, only decisions you can back with research. Sounds like you have that. The biggest key is to surround yourself with a great team that is local.

I hope this helped a little.

@Jason Ma You can spend all the time looking for a deal that meets the criteria, and then the rehab could come back way higher and the cash flow ends up being less than expected. Or you can go with something that has a little less cash flow on paper, and end up having things go your way, yielding better cash flow. Everyone wants a great first BRRRR, but even a base hit would be a good way to get things started. You'll establish, or further develop, your relationships with your agent/contractor/PM and there's a ton of value to that.

Originally posted by @Justin Polston :

@Jason Ma the one thing a CEO does best is makes decisions and pulls the trigger, efficiently and accurately as possible. But the hardest thing is just pulling that trigger.

You're getting data overload too it sounds like. Best of luck.

Brilliant insight. 

@Jason Ma   I'd double check the property taxes. I'm a east side investor (Marion County) and my tax is $2200. That's for an investment property of course. Everything else seems great assuming you find a distressed property!

@Jason Ma Yes looks about right. $35k is probably a medium rehab including quite a bit more than what you would get for that money in Cali. For taxes, I assume 2.2% of ARV. That's probably on the conservative side. When I check past taxes it's usually around 2.2% of assessed value which should be lower than ARV. 20% CoC sound quite high to me. I would settle for 12% and have already problems to make that work. The biggest problem that I usually run into when analyzing is the missing comps that would allow to pull out all or most of the invested cash.

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