How to identify a good property to use BRRRR Method

[Chris Laino]

I'm looking to use the BRRRR method for my first real estate investment deal, but I'm feeling overwhelmed on choosing the right right property to do this on. What should I be looking for? How can I mitigate risk as much as possible and "know" I'm getting the right property to perform this on?

[Anna Buffkin]

I am by no means the pro others are, but here are my thoughts:

First of all, what is your property criteria?  For example, my husband and I purchase 3 bed preferably 2 bath homes and 2 bed 1 and 2 bath condos or multifamily units in the 29210 and 29205 zip codes of Columbia, SC as well as 3/2 homes in Irmo, SC (Columbia suburb).  Homes must meet the 1% rent/price rule and condos/MF must meet 2% rule.  

Next, what type of tenant are you looking for?  I feel like the risk/ reward is best in the lower middle, stereotypical "blue collar" tenant in my market.  To me, poor tenants in "war zones" are too risky and A class properties have too little reward due to the low risk.  Based on my desired tenant, I want to be in the second quartile of median rents.

Based on my criteria above, I start looking for a new property and I want to BRRRR. As condos in my area are mostly a cash play not good BRRRs, I narrow my search to houses. Median rents for a 3 bedroom house in my area is $1200. Which means I'm looking for a house that will rent for $900-1200 (2nd quartile rents targeted at lower middle tenant affordability). If I refuse to buy a house that doesn't met the 1% rule even after refi (your percent may be different, but this is what works for me) , the most I can refi is $120,000. This knowledge has me looking for houses under a $100k including all repairs in order to BRRR out at least $20k.

Based on the above, I have now limited my search to 3 zip codes, a certain type of property and max price.  Many, if not most, will be weeded out just on this criteria alone.  

Beyond that, the house tends to find you as much as you find the house.