Too Much Equity to BRRRR?

[Jim Gurtner]

On page 82 of the BRRRR book it says if a property cash flows $300/month, but has $60k in equity, flipping should be considered due to low ROI.

I have a property that will have $80k into it, including rehab. It will appraise for $185-220k, with resulting equity of $105-140k. So according to the BRRRR book I should flip, right?

If I only find deals like this, I should always flip and never BRRRR, right?

Here is the exact quote from the BRRRR book:

" How can you know if you should refinance or sell? I advise investors to analyze whether the ROI you will get on a particular deal is as good as the ROI you can expect on your current deal. For instance, if you run the numbers and see you can BRRRR and achieve a 10 percent ROI, but you know you are averaging a 30 percent ROI on most other deals, you may want to sell that property and recover your money to put somewhere else that will give you a better return.

This becomes especially important when you are likely to add more equity to the property than you originally anticipated. If you thought you might make $30,000 on a flip when you first analyzed it, but end up looking at a possible $60,000 profit, that would cause me to look closer at the ROI on my cash flow. If I find that I'm going to cash-flow $300 a month, I can quickly see that $300 a month is a 12 percent return on the $30,000 I would have made, but only a 6 percent return if I'm going to have $60,000 in equity.

This would cause me to consider flipping instead. If done well, I would end up with more capital to put into future properties.”