Mortgage Cost vs Rents on High Value Properties

[John McCormick]

My partner and I are just starting out and we would like to do buy and hold, ideally BRRRR. I am trying to understand how to make the numbers work when rents cannot pay the mortgage. For instance, on a recent BP podcast Brandon was talking about how the tenants on his $1.7M property are so much less work than the tenants in his $200K. Even if he got a screaming deal and bought the property and rehabed it for $1M, the mortgage alone is ~$5,000 per month. Rents on $1.3M homes are ~$5,000 (I'm sure it varies by area).

The properties I'm looking at are much less expensive, $150k to $250k, but rents in the area are relatively low.  They definitely do not meet the 1% rule, but there is not shortage of investors in the markets I'm shopping.

So my question is, if rents don't cover the mortgage, do I just have to leave my working capital in the property? Is BRRRR primarily just a strategy for lower end homes? Am I missing something else?

Thanks for your time and help.