I screened 350 Birmingham MLS listings as BRRRRs. Zero passed. Here's what I found.
I'm flying into Birmingham in October to scout deals, so I pulled every single family home listed under $200K on Redfin (350 listings) and ran them all through my BRRRR underwriting model before booking a single property tour.
Zero passed. 13 came close. Here's the breakdown.
My assumptions (same across all 350):
- - 20% down, 7.5% purchase loan rate
- - 75% LTV cash-out refi at 6.5%
- - 6-month rehab with 12% hard money + 2 points origination
- - 5% vacancy, 8% maintenance, 1.5% of ARV for taxes/insurance
- - DSCR threshold: 1.25 (strong pass for most lenders)
- - Minimum targets: 8% CoC return, positive cash flow, all-in/ARV under 85%
The results (329 valid listings):
| Price Range | Listings | Pass / Marginal | Avg Cash Flow | Avg DSCR | Positive CF |
|---|---|---|---|---|---|
| $40-80K | 59 | 0 / 13 | $254/mo | 1.22 | 98% |
| $80-120K | 111 | 0 / 0 | $80/mo | 0.95 | 76% |
| $120-160K | 96 | 0 / 0 | -$130/mo | 0.78 | 21% |
| $160-200K | 63 | 0 / 0 | -$387/mo | 0.64 | 0% |
Read that last row again. Not a single listing over $160K has positive cash flow as a BRRRR at current rates.
The 3 deals that came closest:
Deal A: Monte Sano, 3/1, $40K, built 1940
Cash flow: $526/mo. CoC: 42.9%. DSCR: 1.82. Looks incredible on paper, but the rehab is $29K on a $40K house and all-in/ARV is 92%. You're leaving $15K in the deal with no refi path to recover it. Solid buy-and-hold, not a BRRRR.
Deal B: Ensley, 3/2, $49K, built 1935
Cash flow: $506/mo. DSCR: 1.61. But rehab is $45K on a $49K purchase, all-in/ARV: 101%. You'd need the ARV to come in 30% higher than my estimate for the refi to work. This is where local comp knowledge changes the verdict.
Deal C: Central Park, 4/1, $85.5K, built 1950
The cheapest 4-bed that clears DSCR (1.31). Cash flow: $401/mo. But all-in/ARV is 101% and you're parking $35K in the deal. Only works if you negotiate 15-20% off list or ARV comps come in higher.
What I learned:
- 1. Cheap properties cash flow, but they aren't BRRRRs. The $40-80K range has strong cash flow and DSCRs, but rehab costs as much as the house and the ARV doesn't support enough refi proceeds to recover your capital.
- 2. DSCR is the silent killer in the middle. The $80-120K range produces some cash flow, but the average DSCR is 0.95. Your side of the underwriting says "marginal." The lender's side says "no."
- 3. Nothing above $160K even cash flows. At current rates, debt service on a 75% LTV refi just eats the rent.
The bottom line: BRRRR from MLS at current interest rates is a very narrow path. The deals that work aren't on Redfin at asking price. They're off-market, wholesale, auction, or negotiated 20-30% below list.
I'm still going to Birmingham in October. But I'm spending my time meeting wholesalers and driving for dollars, not touring MLS listings.
One caveat: My ARV estimates are formula-based, not from local comps. That's the weakest part of this analysis. If you invest in Birmingham and know what renovated comps actually look like in these neighborhoods, I'd love to hear what I'm getting wrong.
Most Popular Reply
I am local to Birmingham. Broker, property manager, & investor here — I manage in the exact neighborhoods you named. You did more homework than 95% of the people who fly in, so I'm going to take your caveat seriously & split this into what you got right & what you got wrong.
What you got right:
1. The cheap end doesn't BRRRR. You are correct & most people here won't tell you that. $40-80k houses cash flow & they don't refi out. Both things are true at the same time & you found it with math instead of finding it with your own money.
2. Rehab costing as much as the house is a real signal, not a fluke. When a $49k purchase needs $45k of work, that isn't a discount, that's the market pricing the deficiencies correctly. You read that right.
3. Your ARV caveat. You flagged your own weakest input before anyone else could. That is the single most honest thing in the post & it happens to be the exact thing that broke your analysis.
4. Nothing above $160k cash flowing at these rates. That's not a Birmingham problem, that's a debt service problem, & you're right about it.
What you got wrong:
Your model is fine. Your dataset is the problem.
You pulled every SFR under $200k. The median sale price for the city of Birmingham is right around $210k-$214k. So your screen isn't "the Birmingham MLS," it's the bottom half of it. You screened the weakest sub-markets in the city, ran clean math on them, & concluded the market doesn't work.
What you actually proved is that the bottom of the market doesn't work as a BRRRR. That's a leverage conclusion, not a market conclusion. The bottom of the market works fine for cash flow — if you pay cash. Look at your own Deal A. $526/mo, 42.9% CoC, & you called it a solid buy & hold yourself. The only thing killing it is that you're trying to get your money back out. Strip the refi requirement & the deal is alive. Your model didn't find zero deals in Birmingham. It found zero deals that survive a 75% LTV cash-out at 6.5%. Those are very different findings.
And here is the mechanism your formula can't see: ARV is not a function of rehab spend. It's a function of what the buyer pool in that specific pocket will pay & what an appraiser can support with comps. I used to appraise here. If there are no renovated comps within reach, there is no ARV to refi against no matter how nice you make the house. You can put $45k into that Ensley 3/2 & the appraiser has nothing to bracket it with, because the last sales near it were in the 40s & 50s. That's why your all-in/ARV came back at 101%. It isn't a rounding error. It's the market telling you the truth. If an appraiser has to force the value, it's not going to happen.
Same on Monte Sano & Central Park. Those aren't BRRRRs & negotiating 20% off list doesn't make them one, because the constraint is on the back end, not the front end. But that doesn't mean they're bad assets. It means they're cash assets. That's a decision about your capital, not about Birmingham.
The part that worries me:
You closed by saying you'll spend October meeting wholesalers & driving for dollars. Be careful. Birmingham has a very active pipeline of turnkey operators who buy low, do cosmetic work, & resell to out of state investors at or above retail on the 1% rule. You just publicly described yourself as an out of state buyer with a flight booked & a spreadsheet that says nothing on the MLS works. That is the exact profile that pipeline is built for. If you ask people to show you deals, they will show you what makes them the most money.
Free tactic, do it from your desk this week:
Take your 13 marginals. Pull each one up on street view & drive the block from your computer. Are the yards cut? Boarded windows two doors down? Now find me a renovated house on that street & what it sold for. That last one is the whole ballgame. No renovated comp on the street = no BRRRR. But it can still be a cash flow property, & those are two different questions you've been asking as one.
The real fork in the road is this: are you trying to recycle capital, or are you trying to own cash flowing assets in Birmingham? Your data answers the first question with a no & the second question with a yes, & you only heard the no.
You caught the right problem. You just aimed it at the market instead of at your ARV inputs & your leverage assumptions.
When you're here in October, bring me your 13 & I'll tell you which ones I'd manage & which ones I wouldn't. If I wouldn't manage it, I don't think you should buy it. Costs you nothing & I don't need anything from you for it.
Hope this helps.