What factors of a property analysis let's you know if you will still have a positive cash flow after doing a cash out refi on a BRRRR property? What do you look for? Does the 1% rule have anything to do with that?
1. Determine your gross rental income from the property (how much will you earn in income each month).
2. Determine your monthly expenses -- factor in a monthly allowance for vacancy and capital costs.
3. Subtract #2 from #1. Let's call this your monthly net income (NI) from the property.
Your NI is how much pre-tax dollars you put in your pocket assuming you have no debt service (loan payment). So, if you want to ensure that you have positive cash flow, you need to ensure that your monthly loan payment is less than this monthly NI amount.
There are more complicated ways of determining whether you'll have positive cash flow (stemming from positive leverage) using the cap rate of the property and the loan constant for your loan, but the above is the easiest way to start.
@Dan Constantine all areas have different metrics that work. Mine goes something like this....
1% of rent = Purchase + closing costs + Rehab. You might find that 1% isnt enough to cashflow, so you'll have to figure out where your rent to "all-in" ratio needs to be. One thing I did was run A LOT of properties through the BP BRRRR calculator just to get a feel for what works in my market
Something that has helped me, ironically, is j. Scott's book on estimating rehabs. It's a great refrence for getting a quick rehab estimate to plug into the calculator.