Making sense of BRRRR numbers

[Simon Stahl]

Hi

I am analyzing a lot of properties to find potential BRRRR candidates, but am having a hard time to make the numbers work. I now started listening to @David Greene's BRRRR book and was wondering how he is doing it. In the book, he says that he wants to get a loan for 75% of the ARV, which is also his all in budget, and he mentions that he can make a 0.8% all in to rent ratio cash flow. I just can't figure out how that should work.

Let's look at a simple example: Let's assume $100k ARV, that would be $75k purchase plus rehab max to be able to get it all out again, and $600 rent (0.8% of 75k). According to David's book this should cash flow, but if I plug those numbers into my smart excel sheet I get the following: Cashflow = 600 rent - 380 (30 year mortgage @ 4.5%) - 138 (assumed 2.2% property taxes) - 70 (insurance) - 50 (property management) = -$38. That is already a negative cashflow and I am not even accounting for vacancies and capex yet. Even with 1% all in to rent ratio, that would only be $112 cashflow per month. That is not enough for vacancies and capex AND have cashflow left at the end.

So can someone please explain to me how he can make this work?