BRRR Analysis help on Two Multi Family

[Christian Reyes]

I'm hoping this is the place to share this. I'm driving around an old neighborhood of mine tonight and I see a FSBO, Two family house in the A- area of the nicest city north of NYC. Decent schools, lowish taxes for NYC.

I've rented in these areas before so I'm thinking I can get at least $3,800 per month out of the two units. Here are some details as well as the BRRR calculator PDF:

• Multi family
• Beds: 4
• House size: 2,194 sq ft
• Stories: 3
• Lot size: 7405
• Garage: Basement Garage
• Cooling: Unknown
• Year built: 1925
• Property type: Multi family
• Style: Other
• Date updated: 04/21/2016
• Units: 2
• Fireplace: Yes

• Year built: 1925
• Price/Sq Ft: $264
• TAXES $9,410

Asking $580,000

I haven't gotten inside but I anticipate since its a 1920's house it may not have been renovated too many times. I may get away with some cosmetic stuff. Maybe not.

I punched in all the numbers into the BRR calculator but I'm not sure if I'm understanding the math right. It looks unless I get this house far below $500,000, I'll be in a money pit.

For fun, I put in something like $450 as the purchase price and my Cash on Cash ROI went up within a few years into INF%. Not sure what that means.

Any help is appreciated.

https://www.biggerpockets.com/calculators/shared/6...

[Brent Coombs]

@Christian Reyes, from a pure numbers point of view, for the BRRRR strategy to work for you, your all-in cost to get it to ARV standard would need to be no more than 70% of its ARV. So, if it appraises at $580k with no rehab required, your all-in cost should be no more than $406k.

Otherwise, you're not likely to get all your deposit back upon Refi, so you can REPEAT. (Because even if a Lender will loan you more than 70% valuation - should you really leverage higher?)

Also, even if you pay no more than $406k, because its gross return would STILL be less than 1% per month, it might STILL be "a money pit"?

(The "infinite % returns" you mentioned will only apply when you have NO money left in the deal, but are STILL cash flowing positively - even if only $1 or more per year). Cheers...