BRRRR Question on Capital Invested

[Ashley Wynn]

Most of the books, blogs, podcasts, etc...that I've read and listened to suggests not purchasing a property for BRRRR more than 70% ARV less the rehab costs. I understand that once you refinance, most lenders will loan up to 70% of the value which allows you pay yourself back the capital you invested or pay off your private lender/hard money loan. However, if you purchase and rehab costs are 70% of the ARV, how do you recoup the costs for closing and carrying costs to truly make these deals "no money invested"? It seems like because of these costs, you truly never get back 100% of your capital invested.

[Tom Shallcross]

Everything @Alexander Felice stated.  I do want to add that let's say you "leave" 10k in a deal because lower than expected appraisal (or whatever), and you net 300/M rent after all expenses and contingencies.  You are earning 3,600 a year on the 10k investment not accounting for potential appreciation, loan paydown...etc.

That's still a great return (at least for me it is!).  Yes you can run out of capital if are scaling fast and you leave a lot of money in every deal, but it's not the end of the world if it happens every so often.