Long-Term BRRRR Strategy Calculator / Calculations?

Question

I'm building out a business plan and working on a long-term strategy that will ultimately provide retirement income somewhere around 15-20 years down the time horizon. My better (and data-driven) half asked a question about what the "end of the road"/start of retirement would look like using the BRRRR strategy and I didn't have an answer. So off I go searching for a calculator of sorts that might help and I've found a few that get me most of the way there but not all the way. Some give me the 30 year analysis on a single property which I suppose i could aggregate and get an answer but it's sloppy, or I found one in the FilePlace that runs out over multiple years for multiple properties which was great, except it excludes the BRRRR idea and and rehab costs.

So I'm turning to the community in hopes that somebody can in turn point me to a nifty tool or make a suggestion that I haven't thought of to arrive at an answer.

John Leavelle · Answer

@Charles Soper

Your link does not appear in your post. You can use the BRRRR calculator to determine the current costs and CCR.  However, I do not think it is possible to predict the things you are asking for.   Each property is unique and all costs associated with it are different.  Therefore, the returns are also different.  Two properties could be similar yet the the purchase price can be significantly different.  Rehab costs will be different.  As will operating expenses.

The BRRRR strategy is a good method to continuously acquire properties utilizing the same basic cash investment.  Which in turn increases your return to infinity.  This strategy is not the best for achieving greater cash flow per unit.  However, it is an excellent method to improve your CCR.  You do not have to continually save up in order to purchase the next property.

My suggestion is to insure you establish criteria that every property must meet.  Such as they must Cash Flow a minimum of $200 per unit per month when stabilized.  CCR must be a minimum of 10%.  These criteria may not work the same when the BRRRR strategy is used.  Cash Flow could be lower because of the increased Refi loan amount.  However, the CCR will be greatly improved.

The bottom line is to set goals, evaluate each property according to your criteria, and continue to grow your portfolio.

John Leavelle · Answer

Howdy @Charles Soper

Not sure what you are really looking for.  Are you looking for a calculator to figure ROI over the 15 - 20 year timeframe?

Or are you trying to determine how many rental properties you will need to obtain a certain amount of passive income for your retirement?

Here’s my first guess of what you are wanting.  Let’s say you want to be able to live off of $10,000 per month in passive income at retirement.  How many units will this take?  It depends on your investment criteria.  If you require a minimum of $100 per month Cash Flow per unit , then you will need 100 units.  $150 per unit/75 units required and $200 per unit you will need 50 units.

Then divide the number of units required by the number of years until you retire and you get the average number unit you need to purchase per year to meet your goals.  100 units/20 years = 5 units per year.  The types of units you purchase dictate how many properties you need.  SFR will require a whole lot them.  Small residential multi family properties (2 - 4 units) will get you there faster.  And of course small apartments (5 - 20 units) will meet your goals quicker.

Charles Soper · Answer

My bad on the link: https://www.biggerpockets.com/files/user/DrewS777/...

I was shooting for a generic model that I could plug some criteria into, such as you called out regarding monthly cash flow, CCR, etc.  Right now my goals per unit are pretty close to what you've laid out, at least $200/month in cash flow and 10-12% CCR with a long term goal of $13k/month aggregate cash flow.  I'm leaning more and more towards small multi-family just because in my area finding anything that's close to the 1% rule in a SFR puts me very solidly in Class D neighborhoods.

I appreciate your help and you've given me a few other things to think about as the end of the year approaches.

Thanks again!

Charles Soper · Answer

Hey @John Leavelle,

Thanks for the response.  I tend to get a little wordy and muddle my thoughts sometimes, and typing rarely alleviates that ailment.

I understand the basic calculations for and have a spreadsheet put together that shows me how many properties I would need for $X/month of income.  What I'm looking for is how to incorporate the BRRRRR math into that spreadsheet that would show initial capital outlay, repairs, refi costs, and ultimately the return of the capital.  In addition, how that all plays out across 20, 30, 40 properties over time.

Here's a link to a spreadsheet that another member provided that gives me the first part.  Perhaps I'm just spreadsheet stupid (which is sad for an IT guy).

Did I stir the mud enough?