Help me to understand why this is a good or bad deal. BRRRR

[Michael Kotylo]

I'm analyzing one deal per day. I came across a house that needs work and seemed like a great BRRRR, but after calculating the numbers, I'm not sure if it's worthwhile.

I calculated 6mos of rehab/holding time and 6 mos before cash out refi. If all went according to plan, I would get my initial investment back, plus 40k after refi, but the property would have a negative monthly cashflow for the first few years. Which basically means that 40k is more like ~30k. This is assuming everything goes right and nothing goes wrong. What do you all think, is this a good deal or a bad deal, and why? Thanks!

[Najma Osman]

Hi @Michael Kotylo, 

I would never recommend negative cash flow, even if your profits after refinancing can cover it. You may be better off rehabbing and selling or looking for another deal that does cash flow. If you can not find deals in your market that cash flow, consider other markets.