BRRRR Strategy - Would you consider this as a good deal?

[Fabio Busatto]

It is my first time using the BRRR strategy instead of just flipping the house and I must say I am bit concern over the number.

Here are the details:

I paid €141.750K for an apartment using private money to fund the entire purchase price. I spent about € 6K renovating the unit. My all-in cost after all of the renovation cost, financing cost, utilities, refinance fees and closing costs was about €156,000K.

The bank appraised the property at € 220.000K and allowed me to do a cash-out-refinance at 70% loan-to-value. I may take out the full 70% which came out to €155.000, leaving roughly €1K of my own cash into the deal.

I receive an offer to rent the unit for € 900/month on a 8-years lease. Here are some data based on my assumptions for the first year:

• Rental income: € 10.800
• Vacancy rate (4%): € 432
• Gross income: € 10.368
• Total expenses: € 2.552
• NOI: € 7.816
• Mortgage: € 7.159 (30 year loan with 2.55% interest rate, principal & interest)
• Cashflow: € 657
• Cash ROI: 65,70%
• Equity accrued: € 3.373
• Total return: € 4.030
• Total ROI: 403,30%

When you look at this deal through a cash-on-cash analysis the yield looks insanely high but what I’m concern about is cash flow leaving just € 657/year on the table, exposing me to any missing payments from tenants or market correction.

What do you think about the numbers?

Thank you in advance for any and all replies.