I screened 350 Birmingham MLS listings as BRRRRs. Zero passed. Here's what I found.

Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes

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.

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Jason CoryPro Member

Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes

2mo

@Idan Deutsch

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.

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Caleb Brown
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
2mo
I see a decent bit that may work for MLS. Hard part is it can be competitive, a lot of investors are hungry for deals
3 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Caleb Brown:
  
  I see a decent bit that may work for MLS. Hard part is it can be competitive, a lot of investors are hungry for deals
  That's a good point. Even the 13 marginals in the $40-80K range would get scooped fast by local investors who already have contractor relationships and know the comps. By the time an out-of-state investor runs the numbers and books a flight, those are gone. That's basically what I concluded too...the BRRRR math on MLS only works if you're either local with speed advantage or sourcing off-market where there's less competition on price. Curious if you're seeing the same dynamic in Kansas City?
  0 Reply
- Caleb Brown
  Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
  2mo
  Quote from @Idan Deutsch:
  
  Quote from @Caleb Brown:
  
  I see a decent bit that may work for MLS. Hard part is it can be competitive, a lot of investors are hungry for deals
  That's a good point. Even the 13 marginals in the $40-80K range would get scooped fast by local investors who already have contractor relationships and know the comps. By the time an out-of-state investor runs the numbers and books a flight, those are gone. That's basically what I concluded too...the BRRRR math on MLS only works if you're either local with speed advantage or sourcing off-market where there's less competition on price. Curious if you're seeing the same dynamic in Kansas City?
  
  On or off market is competitive. Run into the same thing with wholesalers, good deals get snatched up quickly. Only time you have less competition is if you're direct to the seller
  1 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Caleb Brown:
  
  Quote from @Idan Deutsch:
  
  Quote from @Caleb Brown:
  
  I see a decent bit that may work for MLS. Hard part is it can be competitive, a lot of investors are hungry for deals
  That's a good point. Even the 13 marginals in the $40-80K range would get scooped fast by local investors who already have contractor relationships and know the comps. By the time an out-of-state investor runs the numbers and books a flight, those are gone. That's basically what I concluded too...the BRRRR math on MLS only works if you're either local with speed advantage or sourcing off-market where there's less competition on price. Curious if you're seeing the same dynamic in Kansas City?
  
  On or off market is competitive. Run into the same thing with wholesalers, good deals get snatched up quickly. Only time you have less competition is if you're direct to the seller
  
  That's fair. Direct-to-seller is where the real margin is, and that's the part you can't screen from a laptop. It's one of the reasons I'm going in person in October instead of trying to do this remotely. Driving neighborhoods and building local relationships is where the deal flow actually comes from. The MLS screening was more about confirming what doesn't work so I don't waste time on the wrong properties when I'm there.
  0 Reply
Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
2mo
But capex does not go down when a property is cheaper so using a fixed percent makes no sense. It should be a fixed ammount. Probably why your numbers make the cheapest homes look best on paper.
4 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Henry Lazerow:
  
  But capex does not go down when a property is cheaper so using a fixed percent makes no sense. It should be a fixed ammount. Probably why your numbers make the cheapest homes look best on paper.
  Good catch, and you're right that a fixed percentage would be misleading. My model doesn't use a fixed percent. It estimates rehab based on age, square footage, and condition indicators. A $40K house built in 1940 gets a $29K rehab estimate (basically a gut job), while a $200K house built in 2020 gets maybe $6K in cosmetics. The cheap homes look best on cash flow specifically because the rents hold up relative to the refi debt, but they fail the BRRRR test because the rehab-to-purchase ratio is so high that the all-in/ARV kills you at refi. You can't pull your capital back out. So I agree with your underlying point. The cheap homes looking good on paper is partly an illusion when you factor in the actual capital recovery.
  0 Reply
Jason CoryPro Member
Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
2mo
@Idan Deutsch

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.
17 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Jason Cory:
  
  @Idan Deutsch
  
  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.
  This is the most valuable response I've gotten on BiggerPockets. Thank you for taking the time.
  
  You're right on the dataset. Pulling everything under $200K when the median is $210-214K means I screened the bottom half and drew a conclusion about the whole market. That's a real flaw in the framing and I should have been clearer about it. What I actually proved is that the bottom of Birmingham MLS doesn't BRRRR, not that Birmingham doesn't BRRRR. Different statement.
  
  The ARV point is the one I learned the most from. I was thinking about ARV as a function of rehab spend, but you're right that it's really a function of what the appraiser can comp. If the last sales on the street were in the 40s and 50s, there's nothing to bracket against, and no amount of rehab changes that. That explains the 101% all-in/ARV on Ensley better than my model does.
  
  Your reframe on the fork in the road is exactly the question I needed to hear. My data does say the bottom of the market cash flows. Deal A at $526/mo and 42.9% CoC is a real asset if you're buying for cash flow and not trying to recycle capital. I was so focused on the BRRRR mechanics that I dismissed deals that fail the refi test but pass the cash flow test. Those are different questions and I conflated them.
  
  The turnkey pipeline warning is noted. I'll be careful about who's showing me what when I'm there in October.
  
  I'd genuinely take you up on the offer to look at the 13 marginals. I'll do the street view homework you described first so I'm not wasting your time with obvious no-gos.
  0 Reply
- Eric Blair
  Member since 2024 · 70 posts · 40 votes
  2mo
  @Jason Cory Hello, I'm local to the Montgomery area with a couple of properties. I'm looking to add a 3rd door this year. Would you be willing to work with me? I'm open to Birmingham if the numbers work. Feel free to PM me if you are. Thanks!
  0 Reply
- Lacey Arrington
  St. Clair County · Member since 2026 · 2 posts · 0 votes
  3w
  Hello @Jason Cory , I am so impressed by the value of information in both the original post and your reply! I am just starting out in the greater Bhm area. I would love to work with you if you have the time for another client.
  0 Reply
Jason CoryPro Member
Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
2mo
@Idan Deutsch
You're welcome
I'll be here in October
1 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
2mo
Looks like this Brrrr investing is more like a JOB than an investment.
Some economic climates you can look at 20 MLS listings and find 5 "deals".
Other times, like these days, you'll find nary a deal on MLS
In these times deals are CREATED, not advertised.
From leads generated by networking
From leads generated from marketing
From leads generated from advertising
From leads generated by negotiating
From leads generated by using creative deal structuring
Private Mortgage Financing Partners, LLC
Website View Page
2 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Don Konipol:
  
  Looks like this Brrrr investing is more like a JOB than an investment.
  Some economic climates you can look at 20 MLS listings and find 5 "deals".
  Other times, like these days, you'll find nary a deal on MLS
  In these times deals are CREATED, not advertised.
  From leads generated by networking
  From leads generated from marketing
  From leads generated from advertising
  From leads generated by negotiating
  From leads generated by using creative deal structuring
  That's exactly where I landed. The data confirmed what experienced investors already know: MLS at current rates isn't where BRRRR deals live. The screening was useful for me as a way to quantify it rather than just take it on faith, but the conclusion is the same. The deals that work are created through the sourcing channels you listed, not found on Redfin.
  
  It's also why I'm planning to spend my October trip meeting local operators and driving neighborhoods rather than touring listed properties. The spreadsheet tells you what doesn't work. The relationships tell you what does.
  0 Reply
Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
2mo
Where's management in your analysis? You live in CA, you can't possibly manage this property class from the opposite side of the country. Does your repair budget replace major systems that are near or at the end of their useful life? If you say yes, your repair inputs can't possibly be accurate, so what happens when they fail? The rates aren't the issue. The real estate is because many of these distant market inexpensive BRRRR properties only appear to cash flow when viewed through a very narrow timeframe that ignores the capital expenditures required to maintain the properties over a longer duration.

Rates fluctuate, but capital expenditures and operating expenditures don't to the same extent...... They tend to continue to increase so you have to build realistic carrying costs into your underwriting. That's where I think your analysis falls short.

It's a tough pill to swallow, but if cash flow is your primary objective, buy low-levered Class A or B real estate, potentially even with interest-only debt. That's something lenders will often consider when the collateral is conservatively leveraged.

I'm not suggesting there aren't other ways to make money in real estate....perhaps even in Birmingham AL (although I don't know this market) but if you're focused on acquiring residential properties that generate meaningful cash flow today, you're not looking where sustainable opportunities exists. Unfortunately, cash flow matters for BRRRR and DSCR loans. Maybe your deal gets past a loan underwriter, is funded and you get the coveted ROC, but that doesn't solve the problem of what happens when the tenant moves in and the major building systems are failing.

[email protected]
4 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Stuart Udis:
  
  Where's management in your analysis? You live in CA, you can't possibly manage this property class from the opposite side of the country. Does your repair budget replace major systems that are near or at the end of their useful life? If you say yes, your repair inputs can't possibly be accurate, so what happens when they fail? The rates aren't the issue. The real estate is because many of these distant market inexpensive BRRRR properties only appear to cash flow when viewed through a very narrow timeframe that ignores the capital expenditures required to maintain the properties over a longer duration.
  
  Rates fluctuate, but capital expenditures and operating expenditures don't to the same extent...... They tend to continue to increase so you have to build realistic carrying costs into your underwriting. That's where I think your analysis falls short.
  
  It's a tough pill to swallow, but if cash flow is your primary objective, buy low-levered Class A or B real estate, potentially even with interest-only debt. That's something lenders will often consider when the collateral is conservatively leveraged.
  
  I'm not suggesting there aren't other ways to make money in real estate....perhaps even in Birmingham AL (although I don't know this market) but if you're focused on acquiring residential properties that generate meaningful cash flow today, you're not looking where sustainable opportunities exists. Unfortunately, cash flow matters for BRRRR and DSCR loans. Maybe your deal gets past a loan underwriter, is funded and you get the coveted ROC, but that doesn't solve the problem of what happens when the tenant moves in and the major building systems are failing.
  
  Fair criticism. My model uses 8% of gross rent for maintenance, which covers routine repairs but not major system replacements. On a $40K house built in 1940, the roof, HVAC, plumbing, and electrical are all either at or past end of life. A single capital event wipes out years of cash flow, and from 2,500 miles away I'm not in a position to manage that risk or even see it coming.
  
  That's a real gap in the analysis and honestly a gap in how a lot of BRRRR content presents the strategy. The numbers on day one can look great, but the 5-year cost of ownership on Class C/D properties in distant markets is a different calculation entirely. Appreciate the pushback.
  1 Reply
Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
2mo
@Stuart Udis

A+++.

@Idan Deutsch
are you really trying to BRRRR from out of state?
1 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Nicholas L.:
  
  @Stuart Udis
  
  A+++.
  
  @Idan Deutsch
  are you really trying to BRRRR from out of state?
  
  That's the goal, yeah. I'm in the Bay Area so buying locally isn't realistic, and Birmingham keeps showing up as a market where the numbers actually work for BRRRR at the $80-120K price point.
  
  I'd genuinely appreciate your take on what the biggest thing newer out-of-state investors get wrong that they don't see coming.
  
  0 Reply
Mark Coates
Contractor · WI · Member since 2024 · 5 posts · 2 votes
2mo
y ohNjgs
0 Reply

Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

2mo

Quote from @Idan Deutsch:

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:

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.

I'm still going to Birmingham in October. But I'm spending my time meeting wholesalers and driving for dollars, not touring MLS listings.

Great feedback from @Jason Cory!

We have the same issues in the City of Detroit.

It's pretty much the same across the country right now.

@Don Konipol covered it best.

The only issue missing is, what are you factoring in for tenant nonperformance?

Your "13" are most likely Class C and D with credit scores under 600.

Check out the chart below that show how the real world will blow your "paper" numbers out of the water:

FICO Score	Pct of Population	Default Probability
800 or more	13.00%	1.00%
750-799	27.00%	1.00%
700-749	18.00%	4.40%
650-699	15.00%	8.90%
600-649	12.00%	15.80%
550-599	8.00%	22.50%
500-549	5.00%	28.40%
Less than 499	2.00%	41.00%

Source: Fair Isaac Company

Other than learning the "lay of the land", you're wasting your time flying anywhere to check out a market with your approach.

Recommend finding an agent and PMC and writing a bunch of lowball offers on MLS stuff to get something under contract to come and see when you have it inspected.
- Better use of your time.

[email protected]248-209-6824

Logical Property Management4.9450 Reviews

Website View Page

2 Reply

Idan Deutsch

Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes

2mo

Quote from @Drew Sygit:

Quote from @Idan Deutsch:

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:

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.

I'm still going to Birmingham in October. But I'm spending my time meeting wholesalers and driving for dollars, not touring MLS listings.

Great feedback from @Jason Cory!

We have the same issues in the City of Detroit.

It's pretty much the same across the country right now.

@Don Konipol covered it best.

The only issue missing is, what are you factoring in for tenant nonperformance?

Your "13" are most likely Class C and D with credit scores under 600.

Check out the chart below that show how the real world will blow your "paper" numbers out of the water:

FICO Score	Pct of Population	Default Probability
800 or more	13.00%	1.00%
750-799	27.00%	1.00%
700-749	18.00%	4.40%
650-699	15.00%	8.90%
600-649	12.00%	15.80%
550-599	8.00%	22.50%
500-549	5.00%	28.40%
Less than 499	2.00%	41.00%

Source: Fair Isaac Company

Other than learning the "lay of the land", you're wasting your time flying anywhere to check out a market with your approach.

Recommend finding an agent and PMC and writing a bunch of lowball offers on MLS stuff to get something under contract to come and see when you have it inspected.
- Better use of your time.

Really appreciate the FICO data, that's a gap in my analysis. My model factors in vacancy (8%) and maintenance reserves but I haven't built in a separate line for tenant nonperformance risk like collection loss, eviction costs, or turnover damage. At the sub-600 FICO range you're describing those could eat into cash flow significantly beyond what a standard vacancy rate captures.

How do you approach that in Detroit? Do you build in a flat "bad debt" percentage on top of vacancy or do you underwrite to a higher vacancy rate to cover it?

I hear you on the better use of time than flying out there to check out a market but I'll be traveling there for some college football anyway. Getting an agent and PMC locked in first and making offers based on the numbers makes more sense than driving neighborhoods.

0 Reply

Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

2mo

Quote from @Idan Deutsch:

Quote from @Drew Sygit:

Quote from @Idan Deutsch:

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:

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.

I'm still going to Birmingham in October. But I'm spending my time meeting wholesalers and driving for dollars, not touring MLS listings.

Great feedback from @Jason Cory!

We have the same issues in the City of Detroit.

It's pretty much the same across the country right now.

@Don Konipol covered it best.

The only issue missing is, what are you factoring in for tenant nonperformance?

Your "13" are most likely Class C and D with credit scores under 600.

Check out the chart below that show how the real world will blow your "paper" numbers out of the water:

FICO Score	Pct of Population	Default Probability
800 or more	13.00%	1.00%
750-799	27.00%	1.00%
700-749	18.00%	4.40%
650-699	15.00%	8.90%
600-649	12.00%	15.80%
550-599	8.00%	22.50%
500-549	5.00%	28.40%
Less than 499	2.00%	41.00%

Source: Fair Isaac Company

Other than learning the "lay of the land", you're wasting your time flying anywhere to check out a market with your approach.

Recommend finding an agent and PMC and writing a bunch of lowball offers on MLS stuff to get something under contract to come and see when you have it inspected.
- Better use of your time.

Those FICO-default numbers are based on consumer credit, so not an exact match for rent.

But, it's the best info we've been able to find.

Since you asked, here's more info:

Key metrics for each Property Class:

Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.

Class C Properties:

Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.

Tenant Default: 10-20% probability of eviction or early lease termination.

Section 8: Class C rents usually meet program requirements, proper screening still recommended.

Vacancies: 10-20%, depending on market conditions and tenant screening.

Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.

Class D Properties:

Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.

Tenant Default: 20-30% probability of eviction or early lease termination.

Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.

[email protected]248-209-6824

Logical Property Management4.9450 Reviews

Website View Page

1 Reply

Idan Deutsch

Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes

2mo

Quote from @Drew Sygit:

Quote from @Idan Deutsch:

Quote from @Drew Sygit:

Quote from @Idan Deutsch:

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:

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.

I'm still going to Birmingham in October. But I'm spending my time meeting wholesalers and driving for dollars, not touring MLS listings.

Great feedback from @Jason Cory!

We have the same issues in the City of Detroit.

It's pretty much the same across the country right now.

@Don Konipol covered it best.

The only issue missing is, what are you factoring in for tenant nonperformance?

Your "13" are most likely Class C and D with credit scores under 600.

Check out the chart below that show how the real world will blow your "paper" numbers out of the water:

FICO Score	Pct of Population	Default Probability
800 or more	13.00%	1.00%
750-799	27.00%	1.00%
700-749	18.00%	4.40%
650-699	15.00%	8.90%
600-649	12.00%	15.80%
550-599	8.00%	22.50%
500-549	5.00%	28.40%
Less than 499	2.00%	41.00%

Source: Fair Isaac Company

Other than learning the "lay of the land", you're wasting your time flying anywhere to check out a market with your approach.

Recommend finding an agent and PMC and writing a bunch of lowball offers on MLS stuff to get something under contract to come and see when you have it inspected.
- Better use of your time.

Those FICO-default numbers are based on consumer credit, so not an exact match for rent.

But, it's the best info we've been able to find.

Since you asked, here's more info:

Key metrics for each Property Class:

Class C Properties:

Tenant Default: 10-20% probability of eviction or early lease termination.

Section 8: Class C rents usually meet program requirements, proper screening still recommended.

Vacancies: 10-20%, depending on market conditions and tenant screening.

Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.

Class D Properties:

Tenant Default: 20-30% probability of eviction or early lease termination.

Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.

@Drew Sygit This is an incredible breakdown, thank you. Saving this for reference.

So if I'm reading this right, my $80-120K Birmingham targets are mostly Class C, which means I should be modeling 10-20% vacancy and 10-20% default probability instead of the 8% vacancy I was using. That alone would flip most of my "marginal" deals to clear fails.

The Class B sweet spot is interesting. Higher FICO tenants, lower default risk, but 1-3 years before positive cash flow and rents too high for Section 8 as a backstop. Sounds like the tradeoff is pay more upfront for a better asset and better tenants, accept negative or breakeven cash flow early, and make your money on appreciation and rent growth over time. Which is basically what Travis Timmons and Marcus Auerbach are saying also.

Really appreciate you sharing this. Gives me a much better framework than just running vacancy as a single flat percentage.

0 Reply

Travis TimmonsPro Member
Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
2mo
@Jason Cory is the best resource you are going to find if you are serious about Birmingham.
Off market does not mean its a good deal, btw. It is higher risk, and a first time investor from California is usually viewed by locals as the dumb money. FWIW, you are probably picking the highest risk RE investment strategy - out of state flips or BRRRRs as a first time investor. Even if it works, it's a bad idea. Value add on these cheap properties is polishing a turd; you are going to get $#!t on your hands.
Meaningful cash flow comes from higher quality assets. You just don't get it in the first year. Leverage + appreciation of rents and values is what makes real estate worth the hassle. Index funds provide a better return than unlevered and low appreciation/value real estate without the hassle factor. Buy the place that you want to own the most 10 years from now - the one that will go from $1800/month in rent to $3300/month in rent while your PITI stays under $2k.The $50k house that rents for $700/month is probably going to rent for $800/month 10 years from now.
If a house is $40-80k, it's because nobody with options wants to live there. That is a tough tenant pool. New investors often look at sub $100k homes and make class A assumptions (rent gets paid, nothing gets stolen, tenants don't trash the house, low vacancy, etc.) on properties that are in crappy neighborhoods.
I'll repeat what has been said above - cash flow does not exist on 20-25% down long term rentals. Anywhere. The cheap ones look good on paper but don't cash flow after a real accounting for capex, vacancy, late/non payment, etc. Even mid term and short term rentals don't cash flow in most markets if you are honest about your expenses.
3 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Travis Timmons:
  
  @Jason Cory is the best resource you are going to find if you are serious about Birmingham.
  Off market does not mean its a good deal, btw. It is higher risk, and a first time investor from California is usually viewed by locals as the dumb money. FWIW, you are probably picking the highest risk RE investment strategy - out of state flips or BRRRRs as a first time investor. Even if it works, it's a bad idea. Value add on these cheap properties is polishing a turd; you are going to get $#!t on your hands.
  Meaningful cash flow comes from higher quality assets. You just don't get it in the first year. Leverage + appreciation of rents and values is what makes real estate worth the hassle. Index funds provide a better return than unlevered and low appreciation/value real estate without the hassle factor. Buy the place that you want to own the most 10 years from now - the one that will go from $1800/month in rent to $3300/month in rent while your PITI stays under $2k.The $50k house that rents for $700/month is probably going to rent for $800/month 10 years from now.
  If a house is $40-80k, it's because nobody with options wants to live there. That is a tough tenant pool. New investors often look at sub $100k homes and make class A assumptions (rent gets paid, nothing gets stolen, tenants don't trash the house, low vacancy, etc.) on properties that are in crappy neighborhoods.
  I'll repeat what has been said above - cash flow does not exist on 20-25% down long term rentals. Anywhere. The cheap ones look good on paper but don't cash flow after a real accounting for capex, vacancy, late/non payment, etc. Even mid term and short term rentals don't cash flow in most markets if you are honest about your expenses.
  
  This is a really valuable counterpoint; appreciate you laying it out. A few of these points are hitting home, especially the tenant quality risk at this price point. @Drew Sygit's FICO data above made the same point and I'm rethinking how I model nonperformance beyond just a vacancy rate.
  
  The argument for higher-quality assets and playing the appreciation/rent growth game makes sense. My constraint is capital. I'm working with a limited initial investment, which is what drew me to the $80-120K range in the first place. Your point about the $50K house only going from $700 to $800 in rent over 10 years is a good reality check on where the actual wealth-building happens.
  
  I'm genuinely weighing whether it's smarter to save longer and buy one better property vs. trying to get into the game now at a lower price point with higher operational risk. That tradeoff is the thing I keep coming back to.
  
  0 Reply
Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
2mo
@Idan Deutsch, you should send a bag of cash to @Jason Cory for his post, or at least fly down there and sing on his birthday: there is more good advice in his post that in half of the real estate books that recently have been published.
One point I'd like to underline: BRRRR does not work well at sub-200k. The purchase price to rehab cost ratio is bad. Rehab does not get cheaper, just because the house was cheap. The sweet spot is between 200 and 300: it will absorb the 50-70k rehab much better.
Textbook-BRRRRs are incredibly rare if you are honest with your math. Most of the time you'll leave some cash in the deal. And year one break even is still a good goal.
What you are going to regret is buying junk in the hood.
4 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Marcus Auerbach:
  
  @Idan Deutsch, you should send a bag of cash to @Jason Cory for his post, or at least fly down there and sing on his birthday: there is more good advice in his post that in half of the real estate books that recently have been published.
  One point I'd like to underline: BRRRR does not work well at sub-200k. The purchase price to rehab cost ratio is bad. Rehab does not get cheaper, just because the house was cheap. The sweet spot is between 200 and 300: it will absorb the 50-70k rehab much better.
  Textbook-BRRRRs are incredibly rare if you are honest with your math. Most of the time you'll leave some cash in the deal. And year one break even is still a good goal.
  What you are going to regret is buying junk in the hood.
  
  @Marcus Auerbach the purchase price to rehab cost ratio point is something I hadn't framed that way before. A $25K rehab on a $90K house is 28% of purchase price. The same $25K on a $250K house is 10%. But the rehab costs roughly the same either way because labor and materials don't care what you paid for the property. So the sub-$200K range forces you into a worse ratio from the start.
  
  That's a meaningful shift in how I'm thinking about target price point. A few others in this thread have pushed back on the sub-$100K range for different reasons (tenant quality, appreciation), but your framing on the rehab ratio is the clearest explanation for why the math breaks down.
  
  And yes, @Jason Cory's reply was a masterclass. Already DM'd him for a birthday serenade.
  1 Reply
Travis TimmonsPro Member
Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
2mo
@Idan Deutsch you're doing the 100-400 hours of self education and research that every new investor should do. You're going to pivot and re-think a lot of ideas. That's how it is supposed to go. I'm of the opinion that value add and owner occupied strategies are all that make sense in the current market. I am also experienced and educated enough to know what value add means - a lot of stress, anxiety, bleeding cash, and headaches over 6-12 months. That's investing in markets where I have a deep bench of contacts in the trades and experience to know real rent rates, ARVs, etc. Most out of state investors are just guessing and hoping. I just got outbid on a property this morning from an out of state buyer on a huge project property. They have no idea what they are getting into, and I'd be willing to bet that the deal does not close.
I'm of the opinion that a property needs to do over $25k/year in gross rents for me to buy it. The capex and maintenance expenses just kill you, and if you don't have a higher quality asset to absorb those, cash flow is an absolute myth. Same goes for our short term rentals as well - if it cannot do 60-80k+ per year, it just won't cover real expenses no matter how good it looks on a spreadsheet.
Last one and I'll stop preaching; the other thing that I wish someone told me in the beginning is that it takes more cash than I thought to buy a place. For example, you probably need $60-70k in cash to buy a $200k property. Down payment + closing costs + make ready expenses + cash reserves adds up to a whole lot more than the 20% that I thought I needed. Every property comes with a project no matter how turn key the seller makes it seem. The only guarantee when you buy a property is that you are about to spend a pile of cash.
Feel free to send me a direct message. I have absolutely nothing to sell and would be happy to help if you think that I can be a resource.
3 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Travis Timmons:
  
  @Idan Deutsch you're doing the 100-400 hours of self education and research that every new investor should do. You're going to pivot and re-think a lot of ideas. That's how it is supposed to go. I'm of the opinion that value add and owner occupied strategies are all that make sense in the current market. I am also experienced and educated enough to know what value add means - a lot of stress, anxiety, bleeding cash, and headaches over 6-12 months. That's investing in markets where I have a deep bench of contacts in the trades and experience to know real rent rates, ARVs, etc. Most out of state investors are just guessing and hoping. I just got outbid on a property this morning from an out of state buyer on a huge project property. They have no idea what they are getting into, and I'd be willing to bet that the deal does not close.
  I'm of the opinion that a property needs to do over $25k/year in gross rents for me to buy it. The capex and maintenance expenses just kill you, and if you don't have a higher quality asset to absorb those, cash flow is an absolute myth. Same goes for our short term rentals as well - if it cannot do 60-80k+ per year, it just won't cover real expenses no matter how good it looks on a spreadsheet.
  Last one and I'll stop preaching; the other thing that I wish someone told me in the beginning is that it takes more cash than I thought to buy a place. For example, you probably need $60-70k in cash to buy a $200k property. Down payment + closing costs + make ready expenses + cash reserves adds up to a whole lot more than the 20% that I thought I needed. Every property comes with a project no matter how turn key the seller makes it seem. The only guarantee when you buy a property is that you are about to spend a pile of cash.
  Feel free to send me a direct message. I have absolutely nothing to sell and would be happy to help if you think that I can be a resource.
  
  @Travis Timmons This is exactly the kind of reality check I was hoping this post would generate. The $25K gross rent threshold is a concrete filter I can actually apply, and the true cash requirement framing ($60-70K for a $200K property once you add closing, make-ready, and reserves) is something most of the content out there doesn't cover.
  
  I'm going to take you up on the DM offer. I'd rather learn from someone with nothing to sell than from someone with a course to push. Sending one over shortly.
  
  0 Reply
Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
2mo
@Idan Deutsch,
The tax side of this model is worth folding in before you set your CoC and DSCR targets, since it changes the real return on a few of these deals. On Deal A and Deal B, that rehab spend isn't a wash from a tax perspective even though it kills the refi math. Site work, cabinets, flooring, fixtures, and other components can often be broken out and depreciated on accelerated schedules or bonus depreciated in year one rather than sitting in the 27.5 year bucket with the rest of the structure, so a big chunk of that $29K or $45K rehab could turn into a real deduction against your income even though it's not coming back to you through the refi.

The cash out refi itself is a non event for tax purposes regardless of how the numbers shake out. Pulling equity out isn't taxable income, so a deal that leaves capital parked in it isn't creating a tax problem, it's just tying up cash. Where it does matter is depreciation basis. Your basis is set by what you actually paid plus rehab costs, not by the refinanced loan amount, so overleveraging through the refi doesn't inflate what you can depreciate.

On financing, DSCR loans and hard money both generate deductible interest against the rental once it's placed in service, but during the six month rehab window before the property is rented, that interest typically has to be capitalized into the basis rather than deducted currently if you fall under certain rule.

None of this flips a deal that doesn't cash flow into a good one, but it does mean the tax benefit on some of these marginal deals is better than the DSCR and CoC numbers alone suggest, especially anything with meaningful rehab dollars in it.

Happy to connect!
[email protected]941-914-7779
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1 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Ashish Acharya:
  
  @Idan Deutsch,
  The tax side of this model is worth folding in before you set your CoC and DSCR targets, since it changes the real return on a few of these deals. On Deal A and Deal B, that rehab spend isn't a wash from a tax perspective even though it kills the refi math. Site work, cabinets, flooring, fixtures, and other components can often be broken out and depreciated on accelerated schedules or bonus depreciated in year one rather than sitting in the 27.5 year bucket with the rest of the structure, so a big chunk of that $29K or $45K rehab could turn into a real deduction against your income even though it's not coming back to you through the refi.
  
  The cash out refi itself is a non event for tax purposes regardless of how the numbers shake out. Pulling equity out isn't taxable income, so a deal that leaves capital parked in it isn't creating a tax problem, it's just tying up cash. Where it does matter is depreciation basis. Your basis is set by what you actually paid plus rehab costs, not by the refinanced loan amount, so overleveraging through the refi doesn't inflate what you can depreciate.
  
  On financing, DSCR loans and hard money both generate deductible interest against the rental once it's placed in service, but during the six month rehab window before the property is rented, that interest typically has to be capitalized into the basis rather than deducted currently if you fall under certain rule.
  
  None of this flips a deal that doesn't cash flow into a good one, but it does mean the tax benefit on some of these marginal deals is better than the DSCR and CoC numbers alone suggest, especially anything with meaningful rehab dollars in it.
  
  Happy to connect!
  
  @Ashish Acharya This is a dimension I haven't built into my analysis at all, and it's a good one. I've been evaluating deals purely on cash flow metrics (CoC, DSCR) without factoring in the tax benefit of accelerated depreciation on rehab components. On the 13 marginal deals in my dataset, some of them had $29-45K in rehab estimates. If a meaningful chunk of that can be broken out and bonus depreciated in year one rather than spread across 27.5 years, it changes the after-tax return meaningfully even if the pre-tax cash flow is thin.
  
  The point about basis being set by purchase price plus rehab costs (not the refi amount) is something I see glossed over constantly. Good to have it stated clearly.
  
  This is actually directly relevant to a project I have in flight right now. I'm adding a 450 sq ft ADU to my basement in Oakland (owner-occupied value-add, roughly doubling usable square footage). Significant rehab spend going into it and I've been planning to do a cost segregation study once it's complete. Would love to pick your brain on how to think about the cost seg on that type of project, especially what components are worth breaking out for accelerated depreciation vs. what just stays in the 27.5-year bucket.
  
  Happy to connect as well. Sending you a DM.
  0 Reply
Tabish Masood
Investor · Sterling, VA · Member since 2026 · 89 posts · 48 votes
2mo

This is one of the best breakdowns I've seen on a BP thread — most people either eyeball a market or run 3-4 comps and call it a day. Running all 350 through a consistent model is the right way to do it.

A few things that jump out from the data side:

Your ARV caveat is the crux of the whole analysis, and I think it's more consequential than you're giving it credit for. Formula-based ARV (usually a $/sqft or comp-multiplier approach) tends to smooth over exactly the kind of block-by-block variance that decides whether Ensley or Central Park actually clear. In markets like Birmingham where you've got 1930s-1950s housing stock sitting right next to recently-flipped comps, a 10-15% ARV swing between two streets is normal — and at 101% all-in/ARV, that's the difference between "dead deal" and "cash out and BRRRR again." I'd treat your 13 marginals less as "close but no cigar" and more as "worth a local agent pulling renovated comps on these specific streets before you write any off."

Second — your DSCR observation about the $80-120K band is the more interesting finding than the "nothing above $160K works" headline, honestly. A 0.95 average DSCR with 76% positive cash flow tells me the model is penalizing these on the refi side specifically, not on operations. That's usually a sign the deals aren't inherently bad — they're bad as leveraged BRRRRs at 75% LTV. Worth running the same 111 listings as straight buy-and-holds at 70% or even 65% LTV cash-out. You'd probably find a meaningfully bigger pass rate, just with more cash left in.

Third, worth stress-testing your rehab assumption. 6-month timeline + 12% hard money + 2 points is fairly standard, but on $40-90K houses built pre-1950, unknowns (foundation, knob-and-tube, cast iron) blow past estimates more often than not. If you haven't already, I'd run a sensitivity pass at +20% rehab cost across the $40-80K band specifically — that's where your "closest" deals live and where surprises hurt most.

Appreciate you sharing the actual numbers instead of just the conclusion. Curious whether you're planning to layer in any auction/wholesale comps once you're on the ground in October, since that's really where this analysis points.

Would love to connect and talk about this more.
1 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Tabish Masood:
  
  This is one of the best breakdowns I've seen on a BP thread — most people either eyeball a market or run 3-4 comps and call it a day. Running all 350 through a consistent model is the right way to do it.
  
  A few things that jump out from the data side:
  
  Your ARV caveat is the crux of the whole analysis, and I think it's more consequential than you're giving it credit for. Formula-based ARV (usually a $/sqft or comp-multiplier approach) tends to smooth over exactly the kind of block-by-block variance that decides whether Ensley or Central Park actually clear. In markets like Birmingham where you've got 1930s-1950s housing stock sitting right next to recently-flipped comps, a 10-15% ARV swing between two streets is normal — and at 101% all-in/ARV, that's the difference between "dead deal" and "cash out and BRRRR again." I'd treat your 13 marginals less as "close but no cigar" and more as "worth a local agent pulling renovated comps on these specific streets before you write any off."
  
  Second — your DSCR observation about the $80-120K band is the more interesting finding than the "nothing above $160K works" headline, honestly. A 0.95 average DSCR with 76% positive cash flow tells me the model is penalizing these on the refi side specifically, not on operations. That's usually a sign the deals aren't inherently bad — they're bad as leveraged BRRRRs at 75% LTV. Worth running the same 111 listings as straight buy-and-holds at 70% or even 65% LTV cash-out. You'd probably find a meaningfully bigger pass rate, just with more cash left in.
  
  Third, worth stress-testing your rehab assumption. 6-month timeline + 12% hard money + 2 points is fairly standard, but on $40-90K houses built pre-1950, unknowns (foundation, knob-and-tube, cast iron) blow past estimates more often than not. If you haven't already, I'd run a sensitivity pass at +20% rehab cost across the $40-80K band specifically — that's where your "closest" deals live and where surprises hurt most.
  
  Appreciate you sharing the actual numbers instead of just the conclusion. Curious whether you're planning to layer in any auction/wholesale comps once you're on the ground in October, since that's really where this analysis points.
  
  Would love to connect and talk about this more.
  
  @Tabish Masood Really appreciate the in-depth response here. Three things that clicked:
  
  The reframe on the DSCR finding is the sharpest observation in this thread. You're right that a 0.95 average DSCR with 76% positive cash flow means the operational economics work on most of these. The model is penalizing on the refi side at 75% LTV. I haven't run the same dataset as straight buy-and-holds at 70% or 65% LTV, but that's a straightforward sensitivity to add and I suspect the pass rate would look very different. It changes the question from "do these deals work?" to "do they work as leveraged BRRRRs specifically?"
  
  The ARV variance ties directly to what @Jason Cory flagged. My $/sqft model can't distinguish Ensley from Central Park at the street level, and at 101% all-in/ARV, a 10-15% swing in either direction is the difference between dead deal and viable BRRRR. The 13 marginals deserve real comps from a local agent, not a formula verdict.
  
  Fair point on pre-1950 construction. I used a flat $/sqft rehab estimate and didn't adjust for vintage-specific risks (foundation, knob-and-tube, cast iron). A +20% sensitivity on the $40-80K band is easy to run and probably moves a few of those marginals to clear fails.
  
  I haven't thought that far ahead on auction/wholesale comps yet, but it's a good idea. The MLS data was easy to pull in bulk but probably misses the deals that actually work at this price point.
  
  Would love to connect. Sending you a message.
  0 Reply
Masoud ArouniPro Member
Investor · Pleasanton, CA · Member since 2026 · 119 posts · 52 votes
2mo
@Idan Deutsch, one thing worth separating in your model that nobody has named explicitly
yet: physical vacancy and economic vacancy are two different line items. Your 5-8% vacancy assumption covers units sitting empty between tenants. It doesn't cover units that are occupied but not paying with eg: eviction in process, partial payments, collection loss. On Class C/D stock Drew described, that's a real second number that runs alongside vacancy and not inside it.
A 10% physical vacancy assumption can look conservative on paper while a 15-20% tenant nonperformance rate is running concurrently. Once you split those into separate lines your cash flow projections look materially different than what your model is currently showing.

Also worth noting as a fellow Bay Area investor here. The same math you found in Birmingham holds in every market right now. The out-of-state BRRRR is the workaround, but the execution risk is the real price of entry.
1 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Masoud Arouni:
  
  @Idan Deutsch, one thing worth separating in your model that nobody has named explicitly
  yet: physical vacancy and economic vacancy are two different line items. Your 5-8% vacancy assumption covers units sitting empty between tenants. It doesn't cover units that are occupied but not paying with eg: eviction in process, partial payments, collection loss. On Class C/D stock Drew described, that's a real second number that runs alongside vacancy and not inside it.
  A 10% physical vacancy assumption can look conservative on paper while a 15-20% tenant nonperformance rate is running concurrently. Once you split those into separate lines your cash flow projections look materially different than what your model is currently showing.
  
  Also worth noting as a fellow Bay Area investor here. The same math you found in Birmingham holds in every market right now. The out-of-state BRRRR is the workaround, but the execution risk is the real price of entry.
  
  @Masoud Arouni The physical vs. economic vacancy distinction is the clearest framing anyone in this thread has given on the tenant nonperformance issue. @Drew Sygit's FICO data and property class breakdown above made the same point directionally, but splitting it into two separate concurrent line items is how it actually needs to live in the model. A flat 8% "vacancy" rate that's supposed to cover both is doing two jobs and doing neither well.
  
  Good to hear from a fellow Bay Area investor dealing with the same math. You're right that the numbers don't work locally either, which is what pushed me toward out-of-state markets in the first place. The thread has been a good education on what "execution risk as the price of entry" actually means in practice.
  0 Reply
Crystal SmithPro Member
Moderator
Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
2mo
Quote from @Idan Deutsch:
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.
Interesting study. I recommend you add the following to your study, but before you do this you'll be forces to establish a relationship with at least one investor friendly realtor willing to provide you with the data. I assume you ran your analysis at list price- Have a realtor run the analysis that shows you the actual sold price versus list price average for the areas you explored and the price ranges, then assume using the same percentage against your list of properties to see any of the numbers change.

We purchase on and off the MLS and usually ignore the list price, but we will make strategic decisons based on what the market is telling us regarding what properties eventually sold for.
312-681-7487
1 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  2mo
  Quote from @Crystal Smith:
  
  Quote from @Idan Deutsch:
  
  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.
  
  Interesting study. I recommend you add the following to your study, but before you do this you'll be forces to establish a relationship with at least one investor friendly realtor willing to provide you with the data. I assume you ran your analysis at list price- Have a realtor run the analysis that shows you the actual sold price versus list price average for the areas you explored and the price ranges, then assume using the same percentage against your list of properties to see any of the numbers change.
  
  We purchase on and off the MLS and usually ignore the list price, but we will make strategic decisons based on what the market is telling us regarding what properties eventually sold for.
  
  @Crystal Smith
  
  That's a great point and one I hadn't factored in. Yes, the screen was run entirely on list prices from Redfin exports. I didn't have sold price data for those specific areas and price ranges.
  
  The list-to-sold ratio would matter most on the 13 marginals that were sitting right at the pass/fail line. If properties in those zip codes are consistently closing at 85-90% of list (or lower, given the investor-to-investor cash market at that price point), the all-in cost drops and the deal math shifts meaningfully.
  
  That's another input that points toward needing a local agent relationship before running the next screen. Appreciate the suggestion. I'll factor sold price adjustment into the follow-up analysis.
  0 Reply
Jacob Pacheco
Member since 2026 · 3 posts · 0 votes
1mo
Trying to find a definition for all-in/APR under 85%. Any help?
0 Reply
Patrick Morton
Birmingham, AL · Member since 2025 · 20 posts · 2 votes
1mo
I don't know... we are pulling the 1% rule in OTM areas in bham rn. Properties cash flowing around $500+. Good luck!
0 Reply
Michael Eskenasy
Investor · Pacific Northwest · Member since 2026 · 511 posts · 289 votes
3w
I think you found something more useful than “zero deals.”

You built a bid engine and stopped one step before using it.

Instead of asking, “Does this property work at asking price?” I’d make the model solve for the maximum acquisition price where each deal actually becomes executable.

For every property, work backward from your constraints: 1.25 DSCR, minimum cash flow, 8% CoC, rehab, financing, carry, refinance costs, and whatever amount of capital you’re willing to leave in the deal.

Then the output becomes:

This one works at 5% below ask.
This one needs 12%.
This one needs 25%.
This one is dead at any realistic price.

That’s much more useful than pass/fail.

There’s also one thing buried in your assumptions that may explain why so many of the cheap houses look good operationally but still fail as BRRRRs.

If your refi is capped at 75% LTV, then an 85% all-in/ARV threshold already means you’re leaving capital trapped in the deal before refi costs. So if your definition of a successful BRRRR is recovering most or all of your original capital, your real all-in ceiling probably needs to be materially below 75% of defensible ARV.

That’s why Deal A can throw off great cash flow and still be a bad BRRRR. It may be a perfectly good rental with bad capital-recycling geometry.

I’d keep the MLS data, turn the model around, and use October to validate the handful of properties where local comps or negotiation could actually change the answer.

Don’t ask which listings pass.

Ask what every listing is worth to you.
1 Reply
- Idan Deutsch
  OP
  Investor · Oakland, CA · Member since 2017 · 35 posts · 12 votes
  3w
  @Michael Eskenasy
  This is a much better framing, thanks. Pass/fail was hiding the actual useful number, which is how far off the price actually is, not whether it clears some binary bar.
  The capital recycling point is the sharper one though. I was checking against an 85% all-in/ARV ceiling as my "still viable" cutoff, but you're right that doesn't leave room for refi costs on top of a 75% LTV cap. If the goal is actually getting capital back out, not just decent cash flow, the real ceiling needs to sit meaningfully below 75%, probably closer to 65-70% depending on refi costs. That would reclassify a chunk of my "marginal" bucket as dead-on-arrival for BRRRR specifically, even if they'd make fine straight rentals.
  
  I'll rerun this against the same dataset, solving backward from acquisition price instead of forward from asking price. Curious what ceiling you actually underwrite to in practice. Is 65% close, or do you go lower?
  0 Reply
- Michael Eskenasy
  Investor · Pacific Northwest · Member since 2026 · 511 posts · 289 votes
  3w
  @Idan Deutsch you can use my system 😈
  0 Reply
Jason CoryPro Member
Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
3w
@Lacey Arrington feel free to reach out at your convenience. We can have a conversation to swe if we're a good fit.
0 Reply
Michael Eskenasy
Investor · Pacific Northwest · Member since 2026 · 511 posts · 289 votes
3w
@Idan Deutsch - here's what we can do:

Nick — since I already made the crack that you probably won’t use my system, I might as well explain what I actually meant by it. This isn’t a pitch. It’s literally what we would do with something like the real-estate question you posted here.

You give us the property or opportunity once.

From there, we build the context around it.

We’d pull the property information, asking price, taxes, historical information, market data and whatever public records are relevant. We’d pull actual rent and sales comps rather than just accepting the numbers in the listing. We’d bring in your financing assumptions — rate, down payment, term, closing costs, reserves — and operating assumptions like vacancy, maintenance, management, insurance, CapEx and whatever else actually applies to that asset.

Then we’d underwrite it.

Cash flow, NOI, cap rate, debt coverage, cash-on-cash return, break-even occupancy, total cash required and the effect of changing the major assumptions. If there’s a value-add thesis, we’d separate what we know from what we’re assuming and test whether the numbers still work when the optimistic assumptions are wrong.

But that’s only the first part.

The system would remember why we reached the conclusion we reached.

So if three weeks later the seller drops the price, rates move, you get an insurance quote, the lender changes the terms, a better comp appears or somebody sends you a document, you don’t start the analysis over. That new information enters the existing context and the system tells you what changed and whether it changes the decision.

Then all of the human pieces stay attached to it too.

Who are we waiting on?

What did the lender say?

What did the broker promise to send?

When does the inspection period expire?

What question still hasn’t been answered?

What assumption are we relying on that hasn’t actually been verified?

What needs your judgment, and what can simply be handled without bothering you?

That’s what I mean by Human Cognitive Infrastructure.

And looking at the kind of things you appear to work on, it gets even more useful. A development has architects, contractors, financing, permits, sales, schedules, budgets, customers and a ridiculous number of decisions that happen months apart. The system keeps those things as one continuing piece of context instead of making you the thing responsible for remembering how they all connect.

The point isn’t that you’re incapable of doing any of this yourself.

Clearly you are.

The question I keep asking people is: why should you have to keep doing the parts a computer can carry for you?

You should be making the decisions.

You shouldn’t have to be the database.
0 Reply
Danny Gonzalez
Real Estate Broker · Member since 2024 · 125 posts · 60 votes
1w
That screen is useful even when everything fails. Birmingham under $200K is full of traps (foundation, HVAC, soft rents). Curious what killed most of them for you: ARV, rehab, or rent. That tells you whether to raise buy box or change neighborhoods before October.
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