1st BRRRR - a good deal?

Question

I am looking at investing in my first BRRRR. My question is on monthly cash flow. Here are the numbers:

Purchase - $70K

Rehab  - $50K

ARV - $180K

Cash out refinance - will get 100% of my investment back or pocket up to $15K

Problem - I am estimating that my monthly cash flow will be about $100 a month. My other properties cash flow +$500 a month. I am worried about the low monthly cash flow, but understand this will grow over the years.

Is this a good deal? What are others doing about cash flow on BRRRRs

Ko Kashiwagi · Answer

With the current interest rate, getting 100% of your cash out is definitely a win in my opinion. Especially for a first BRRRR too. If you are really unhappy about the cash out, you can take less cash out, but I don't think it's a big issue if you are cash flowing $100 - you essentially get a free rental when you get 100% of your cash back (with equity built in)

Chris Barrett · Answer

Personally I would leave the 15k in the property and have more of a cashflow cushion while also having an infinite return on your money.

Drew Sygit · Answer

@Craig Hansen what's more important to you, the cash out or the cashflow?

What would the monthly cashflow be if you left the extra $15k in the property?

It's a tradeoff...

Mitch Messer · Answer

Getting just $100/mo would definitely concern me!

Come even the slightest ripple (an increase in property insurance, an unexpected repair, etc.) and suddenly you're drowning in a sea of negative cash flow.

Also, are you including both professional property management and vacancy in your operating expenses?

Many first-timers don't, and then they are CRUSHED when reality bites down hard.

Trust me: I was one of them...

Be very careful!

Joseph Bui · Answer

Getting all your money back and still be cash flow positive? That is literally making money investing nothing and doing nothing. You can't ask for better in my opinion.

John Salcedo · Answer

Have you run the deal through a BRRRR calculator to account for holding costs, closing costs, finance costs, etc?   with an ARV of just 180k, the numbers look tight.  Also, once you start the renovations there will always be change orders and you may end up paying more than you initially estimated.

Keep these things in mind and good luck.

1st BRRRR - a good deal?

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