The 50% Rule on a BRRRR Project. Do or Die?

[Jake Lilly]

Hello,

I have never done a BRRRR before. I am looking forward to it, but have yet to find a deal so far. However, I have been using the BP BRRRR calculator tool for some offers I have made, and my question for the experienced BRRRR investors is this:

If you rehab the property to the point where almost everything is new (roof, kitchen, baths, HVAC, electric, etc), why do you still need to factor in 50% of the rent as going towards expenses if you don't expect any? I get there are some things like yard maintenance, and I know there are unforeseen expenses that can arise, but is this mostly for putting away $$$ for future expenses? Or is it more of an extra measure used to be more confident in a property's ability to cash flow?

Where I live, many investors flip homes. However, the houses being flipping in this market would be extremely hard to rent using the 1% rule once you get over the $90k ARV mark, which makes the 50% rule hard to meet with many of the houses renovated.

Thanks for your time and thoughts!