Running BRRRR Numbers In Montgomery

[David Mueller]

I have been running the numbers in Montgomery, AL preparing myself to get a possible BRRRR deal. From local experts do these numbers seem in the ballpark that I am punching into the Bigger Pockets calculator for neighborhoods such as Dalraida, Morning View, Forest Hills in the $100-150k ARV range?

Purchase closing costs- $600

Vacancy 9%

Repairs 5%   this is after the house has received rent-ready repairs

Cap-Ex 5%

Mgmt. 9%

Property Tax 5%

Local banks I have spoken to will give 70% ARV for cash out in the area for a rental.

Refi Loan Interest Rate 3.5%  with excellent credit.

Cash Flow After Refi  $200-350/monthly

What is considered good cash on cash return for these areas after the refinance?

Thanks for any feedback!

[Matthew Creel]

@David Mueller

We offer to pay all closing costs when purchasing and with our last Dalraida purchase we paid a total of $1,126 for closing which included an owners title policy, title search, attorneys fees, other title fees and recording/transfer fees.  

I would say your vacancy estimate is reasonable. @Greg Parker would be a good person to reach out to concerning vacancy rates in those areas.  

Repairs we reserve 5 to 10 % depending on the age and condition of the property.

Same as above for Cap-ex.  Obviously the age and condition of the major components like the roof and AC play a big part in determining this.  

Mgmt seems reasonable.  I see anywhere from 7 to 10% pretty regularly. Again, Greg Parker is a great reference here. 

Are you talking about 5% of the ARV in regards to taxes? The house we currently own in Dalraida is valued by the County at $127,900 with the the current estimated tax bill being $943.

We regularly get 75% LTV on single family homes we decide to retain as rentals. These are commercial loans through an LLC with recent rates around 4 to 4.3% interest.

I personally think it's more important for you to define what is an acceptable cash on cash return for yourself vs asking what the Montgomery market tends to yield. Define your "buy box" criteria and go after those deals. 

Hope this helps!