Is This a Good Deal “The Proverbial Question”

Kenneth Garrett · 2026-01-25T01:06:44-08:00

The biggest question from newbie and some not so newbie investors, “Is This A Good Deal”. The answer of course is; it depends. What makes a deal good is we don’t know till the end of the project and it’s stabilized. The ideal project is one that you have no money in the deal at the end and it cash flows. That means theoretically a free house. See this example:Buy a property for $150K, rehab it for 50K, the forced ARV is $260K and cash flows $300/month. That’s a great buy. Your cash on cash return is infinite. Your tenant is paying down your mortgage, covering your property taxes and insurance and you’re putting money in your pocket. Even if you had $5000 stuck in and you took the cash flow and put it towards the money stuck in, you are 100% no money in, in 18 months. That’s still a great deal. You can still have a great deal even if the infinite return is delayed. I see these deals are becoming more apparent again in certain markets with the real estate market making its own correction. It takes patience to buy at the right number and may require in an out of state purchase if your market is just not conducive to this concept. What have you been seeing lately or what have you experienced over the last few years?

Chris SeveneyBusiness Member

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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

8mo

I tend to look at real estate in long-term perspective investments. If I am renovating a property yes I want that initial bump from cost to ARV. But I'm also OK with little cash flow upfront because if it isn't an appreciating area, I know in several years the property will do much better on cash flow.

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Kenneth GarrettPro Member

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Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes

8mo

@Chris Seveney

Hi Chris, thanks for responding. I agree it’s definitely a long game. Whether the goal is appreciation or cash flow in general overtime both get better.

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Frank PyleBusiness Member

Specialist · USA · Member since 2024 · 279 posts · 130 votes

8mo

A good deal is one that still works when you are wrong on a few things, not just when the spreadsheet is perfect, and your 150k plus 50k to a 260k value example is a solid way to explain it. The fast check I like is rent minus mortgage, taxes, insurance, management, and repairs and if that number is skinny then the deal is not really stable even if you got a bunch of equity. I have been seeing more sellers meet the market again, but the hidden killer lately has been insurance and taxes jumping and turning a maybe deal into a no.

Curious what markets you are seeing those no money left deals show up again, and what rent number are you using to call it stabilized?

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Stuart UdisPro Member

Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes

8mo

@Kenneth Garrett Your post raises a few important points. First, it's genuinely refreshing to see someone acknowledge that it's okay to leave capital in a deal. The growing belief that only transactions that generate a full return of capital through the BRRRR method are "successful" has done a disservice to a lot of newer investors. The "free house" terminology is another misconception that's become far too common.

In reality, many rehabs are geared toward manipulating an appraisal to maximize ARV while ignoring the building systems that actually determine whether the property will perform long term. A quick example: an investor buys a house with aging HVAC, knob and tube wiring, and a roof with only a few years of life left. They update the kitchen and bathroom, replace a few windows, add new flooring, and the property appraises well. Maybe they even recoup all of their invested capital through a refinance.

But what happens when the furnace and condenser fail in year one? When the tenant complains about constant electrical issues and the idea of opening the walls to replace knob and tube wiring becomes financially unrealistic? When the tenant leaves after a year and the unit needs a full turnover? Or when the roof leaks during a major storm?

There’s nothing “free” about owning that real estate. The returns aren’t infinite, and the capital that was “recovered” at refinance is often only recovered temporarily. Much of it ends up going right back into the property through deferred maintenance and unavoidable capital expenditures.

For that reason, it's premature to claim victory simply because the rehab is complete, the refinance closed, and a tenant is in place. Many people treat that moment as stabilization, but it can be misleading. Very few investors think about what happens after. Most BRRRR underwriting stops at refinance and lease up, and that gap between the spreadsheet and the long term reality is a real problem.

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Kenneth GarrettPro Member

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Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes

8mo

@Stuart Udis

Hi Stuart, excellent points on determining whether the BRRRR was a successful BRRRR even though it might be profitable and you were able to pull all

or most of your money out of the deal.

By knowingly not completing the necessary repairs, the success is somewhat hidden from the facts. In the scenario where you left knob and tube wiring and then electrical issues started arriving or were always there you have deceived the concept of the BRRRR.

The idea of the BRRRR is two fold:

1. By rehabbing the property you forced equity in the deal whereby your funds were returned to you or mostly to you by the appreciation. That part is a success.

2. You did not complete the rehab from a maintenance standpoint. The secondary or in some cases the primary part was to avoid maintenance calls in effect causing higher cost and thereby the BRRRB was not a success in reality, although on paper it appears it was.

Great point!!!

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Corby GoadeBusiness Member

Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes

8mo

Acceptable returns are relative and strategy and asset performance are based on individual resources.

Having newbies get in the game expecting their first deal to have 25% equity and $300 per month in cash flow is probably going to create more analysis paralysis than anything else. While those deals are possible, they're not plentiful and rarely does a new investor have the network or resources to take one down if an opportunity arises.

This is a marathon, not a sprint- if you are focusing on how a property will perform in 5+ years rather than the first month, you'll have many, many more reasonable opportunities in most markets. Even better if you are willing to be a little more uncomfortable and stack a few house hacks together over a decade or so.

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Alex Morales

Member since 2026 · 97 posts · 57 votes

8mo

Great discussion @Kenneth Garrett. Stuart's point about deferred maintenance is critical and often overlooked.

To add to this - the ARV piece is where many BRRRR deals go sideways before they even start. The "forced appreciation" only works if your ARV estimate was accurate. Too many investors use one comp or trust a wholesaler's numbers without verification.

My process before committing to any BRRRR:

1. **Pull 3-5 recent sold comps** (within 90 days, same bed/bath, within 0.5 miles)

2. **Adjust for condition** - A fully renovated comp vs one that sold as-is can swing ARV by 10-15%

3. **Run the numbers at the LOWEST reasonable comp**, not the highest - the spread still needs to work

4. **Account for the "hidden costs"** Stuart mentioned - old systems that pass inspection but fail within 2-3 years

Tools like PropLab, Redfin, and BP Pro calculators can help speed up the initial comp analysis, but nothing replaces understanding your local market's nuances.

The "free house" scenario is rare today. More realistic expectation: $5-15K left in after refi with positive cash flow. That's still a win - you're building a portfolio with leveraged equity. Just make sure the ARV and rehab numbers hold up to scrutiny before going under contract.

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Alex Morales

Member since 2026 · 97 posts · 57 votes

8mo

Great discussion here. Ken's framework is solid and the points about looking beyond the refi moment are crucial.

Building on the ARV verification discussion above - the 3-6 comps within half mile and 90 days is the gold standard but it can be hard to find that many matches in some neighborhoods. When I can't find enough tight comps I expand to 0.75 miles and 6 months, then adjust manually for time and location.

One thing I've found helpful is using multiple data sources for cross-checking. Redfin's sold comp search is my go-to for free data. For properties where I want a faster initial check, I've been testing out PropLab which pulls and adjusts comps automatically. Neither replaces looking at the actual sold listings though - you want to see photos to understand condition.

The point about hidden maintenance costs is huge. I always budget an extra 5-10 percent on the rehab for things you'll find during demo that weren't visible. And if you're buying something with original electrical or HVAC, price that into your numbers upfront even if you're planning to phase it over time.

What markets are you all seeing deals like Ken described ($150k purchase, $50k rehab, $260k ARV)? Midwest seems to still have these but getting harder in the Sunbelt from what I've seen.

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Is This a Good Deal “The Proverbial Question”

Is This a Good Deal “The Proverbial Question”

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