Finding a BRRRR that checks all the boxes

[Ronald Fontenot Jr]

I'm having a hard time finding BRRRR properties that meet the suggested requirements. I've located several properties that are well below 70% ARV, some even as low as 55%, but I cannot get them to do all of the things. Even with light rehabs, it's been difficult. I'm a GC and have the ability to rehab properties well below what an average investor would expect to spend. Seems they all come up with negative cash flow for at least the first two years. In my mind, that's not a deal breaker, especially with my plan to hold the properties for the long term, 10 years at least. I know interest rates are not helping matters at all, so does this mean we should just adjust and expect to cash flow negative and wait for interest rates to normalize and then refinance? Or just wait the market out? Sometimes it feels like searching for a very small needle in a very large haystack.

[Austin Steed]

In this market with debt service taking so much of the revenue you have to add something to the box. Here are a few ways that you can force the numbers into working. I've done some form of all these in Columbus OH. 

1.) Self manage - If you are local this can work well. I've even seen this done from people investing out of state too. Management companies push for lower rents which is a huge loss of revenue. Instead of getting $1,300 for a property you're getting $1,200 and they take 10%. So a difference of $220.

2.) Major rehab for high cap ex. If you use the banks money this works well. You can leverage this as a tax shield for other income you make and is the best of both worlds as you are still financeable to banks. Can also be amplified with a cost segregation. 

3.) Tax abatements. With debt service being so high this is a good way to make sure you cash flow. In Columbus they have incentives where you can lock taxes at current rate for 15 years. 

4.) Look at your pro forma year 3-10, especially if you're locking in long term debt. We've been doing 5/1 ARM commercial financing so years 6-10 could look different for us. Everyone wants immediate cashflow but REI is a long term game if you asked me!

Best of luck with your next BRRR