First Brrrr property breakdown. NEED some advice!!!!

[Anthony Phillips]

So I just completed my first Brrrr.

Purchased house- $235k

Rehab-15k

Appraised value- 325k

Currently rent- $1,950

Mortgage- $1,681

Cashed out $250,000

So I think I did a pretty good job for my first brrrr took a little longer then I wanted with contractor problems and delays. I will have all my initial investment back and the property is cash flowing. I just keep on getting the feeling I am leaving so much money (equity) on the table. I know this is a long term play when using the brrrr and not flipping.

Maybe some more experienced investors could give me some advice. I am currently a W-2 employee making good money. I also have my Real Estate license here in Tennessee. My goal is to try to transfer into being a full time real estate agent in 2 years and continue investing in real estate to hopefully make as much cash flow to pay my bills. This whole brrrr took me about 4-5 months to complete which I think with the proper contractors and plans in place could be cut down to maybe 3. That would only give me about 4 properties I could do in a year if I could find a deal that works. With only making the few hundred dollars and cash flow it will take me a long time to build up to the amount I needed to do real estate full time.

Any Advice from all you veterans of the Real Estate game that were in my shoes at one point??? Thanks guys

[Nathan Gesner]

My advice: learn how to calculate cash flow.

Your mortgage is $1690 and your rental income is $1950. That's $210.

Tenant moves in, stops paying rent after eight months. You've saved the $210 you consider cashflow ($210 x 8 = $1,680). It takes you two months to get the tenant out. You discover his unauthorized dogs tore up the carpet in most of the rooms, scratched up doors, and dug up the yard. The place needs new paint, new flooring, landscaping repairs, etc. It takes you 45 days to turn it around and place the next renter. 

3.5 months lost rent: $6,825

Flooring: $5,000

Paint and other repairs: $2,000

Total lost: $13,825

Even after your $210 monthly cashflow, you've lost $12,145 and it will take 57 months of perfect performance just to break even. 

This is not an uncommon scenario. I know some investors that have lost tens of thousands over the course of 5-10 years so their only gain is appreciation, which is dramatically deluded by the amount of damages caused by bad tenants.

When calculating cashflow, you should include all expenses. Your expenses should include mortgage, taxes, insurance, and at least 30% set aside to cover maintenance, vacancy, capex, and other expenses.