Deal Characteristics for Successful BRRRRs

[Sean McCluskey]

Hey BP! I've been learning passively for awhile and am trying to find the right deal for my first BRRRR.

I'm analyzing a SFH wholesaled deal in a high quality neighborhood, which would be acquired for $100k, which is approximately 55% of ARV, and I was surprised that the deal wasn't cash flowing after theoretically BRRRR-ing the property.

Note that I include PITI, 10% vacancy, 10% PM, 1 month leasing fee, $50/mo for repairs/maintenance calls, and an item by item reserve for future CAPEX replacement, when I calculate monthly cash flow.

This brings me to my question: what are your screening criteria that you use for weeding out bad deals when you're looking to BRRRR?

Is it a rent to price ratio above x? Is it a combination of price % of ARV and final rent to price ratio? Or do you start by looking for assets that are below $75k? Etc.

I'm assuming that I should model the deal as 100% financed at the ARV at 5.5% interest, to test the asset's ability to cash flow w/o including the emphasis of my own equity (which I'm trying to extract, after all).

Thanks in advance!

[Alexander Felice]

for BRRRR I look first for ARV

my biggest goal is to have a property I can pull 100% of my funds out of, so I start with a house I know I can be all-in at 75% of ARV.

If this is possible, then I look to make sure it's in an area I want and we can get sufficient rents out of it.

When doing your interest rate calculation make sure you consider points. I trade the 5.25% rate for the 5.85% rate with more money in my pocket. This is a small but important difference, especially when buying a few a year or more.