Would you do a BRRR that wouldn't recoup all your cash?

Question

The market I buy in is increasing. I can't seem to find any BRRR deals that would allow for me to recoup all my cash in the end. Nevermind making any profit cash.

There is a property with a conservative ARV of $148,000. It is a HUD home and they're asking $80K.

The property needs about $40K in renovation (that includes unexpected items).

Closing with HUD and then closing again for the cash-out refi will total around $10K

I can get a cash-out of 80% of the appraised value, but assuming the numbers above, that means, I could only put in an offer of about $70K. And yeah, that's not factoring in holding costs for the 3-5 months it will take to renovate before I can refi (yes I do not have a 6 or 12 month requirement before refi).

How are people doing BRRR or flipping making money in a market like described?

Would you do a BRRR where you're $5K - $10K in after all is said and done?

Part of me says what's the point if I'm not at least recouping *all* my cash. The other part of me says that getting a renovated rental for $5K-$10K is great.

JD Martin · Answer

I would do that deal especially if it has strong cash flow. For me that would be $400 or more net per month. The last couple I BRRRR I had to leave a little cash behind; the market is just too high right now where I am to get 100% back out.

Nicole A. · Answer

Thank you. I will have to make a decision before this property opens up to investors. Right now, it's only open to potential primary home buyers.

Max T. · Answer

I'm buying and holding for the long run. So yes, I will buy, rehab, rent and then refi and leave money in the deal if the cash flow makes it worth it.

I live off my W2 and use the extra plus rental income to grow the portfolio, so I don't need the money now. Aside from a catastrophic recession, the equity isn't going anywhere while my units stay occupied.

You can always refi again/later as values and rents go up.