BRRRR: No number seems to work. Need advise.

[Reid Beckers]

I’ll try to keep this post simple, if not short.

My wife and I have been educating ourselves, listening to RE podcasts, reading books and BiggerPockets. We have some savings and a Pre-approval letter ready and we also opened a HELOC. We are ready to buy.

Looking for BRRRR opportunities in Columbus OH area. (ARV value $100k to 250k) We've checked many, many, numbers over the last year… numbers always come out negative and nothing seems to work when we try and get money out to recycle.

Basically, I’ve come to realize that nothing matters unless the rent is high enough to cover the cash-out-refi loan amount at the end of the project. It’s great if your property appraises 100k over asking but if rent doesn’t cover the refi and expenses, what’s the point? This always kills our deals and seems VERY difficult to make happen even though numbers work before the refi and can even be greater than a 1% deal if we leave $$$ all in

I hope we're just missing something here cause what I'd like to know is, what does it matter if we can get all our money out and the ARV comes in over and above our money in, if we can't get positive monthly cash flow???

Example:

Purchase price: 75,000

Renovations: 50,000

Total in = 125,000

Appraisal: 200,000

Refi out @ 70% = 140,000

All the money out plus $15,000

But still negative cash flow cause rent only gross’s $2,000.

Monthly expenses:

Loan @ $950

Insurance @ $100

Taxes @ $150

Water @ $300

Vacancy @ $125

Property management @ $225

Cap Ex @ $175

Repair & maintenance @ $100

Total = $2125

-$125 cash flow

I know I could take the equity and sell. I know I could look longer term and wait till rent appreciates, but we don’t want to be flippers and can’t watch money go out the door for a few years if we are going to try and get more properties. And at minimum, it seems that we are doing something fundamentally wrong if we can’t make it work!!

Are we looking for a property in a wrong area? Are the MLS listings prices to high? Are we being too conservative? Should we only be looking for Off market deals? We hesitate since it's our first investment.

People’s first brrrrr success stories seem outside reality to us.

What are we missing? Any advise for newbies like us?

TIA!