All Forum Posts by: Isaac B.

Originally posted by @Sean McCluskey:

Hey @Isaac B., did you end up doing those two deals, and keeping them as BRRRR? If so, do you regret it?

I'm considering a similar scenario to what you describe, a relatively high quality SFR BRRRR that about breaks even on cash flow after considering all taxes and equity paydown, but not Capex reserves.

I see what you mean about holding the asset and eventually owning it with no initial equity investment. That would still be a very nice return over the long long term, despite a few years upfront of fronting a bit of negative cash flow.

Also, another consideration is that any increase in rents caused by inflation can push these from $0 cash flow to positive cash flow.

@Mike Flora, how are you doing with your strategy since your posts here? Any change of heart?

I think this question hinges on the following 2 questions:

1) Are there really no available deals you can do that would cash flow, for $0 of equity in the deal?

2) What % of your total income would the negative cash flow be, in the first X number of years?

Thanks for Reigniting this topic, Sean.

I sold both of these homes in the end. I profited nicely on one, and just about broke even on the other.

My current feeling on this topic is that I should base my rent vs flip decision on how much I'd profit on the flip vs the value of the money.

For arguments sake consider a case where you'd break even on a flip, but can refi all your money out and break even on rental vs mortgage + capex etc... Flip= break even , Rental= long term profits on amortization, potential future cashflow as you mentioned, and hopefully appreciation. No brainer! Just make sure your math is right and you are factoring Capex

Now consider the other extreme case where you can make $100k on the flip, and break even on the rental. I'll take the $100k (after taxes) reinvest it to save future hard money costs (7k/ year guaranteed savings & less risk/ reward)

However The argument can be made to refi, get the amortization, cashflow, and appreciation; & 1031 into a new deal down the road!!

Unless I can Profit from the Refi of course, since those dollars are tax free, cost 6% or so, and can save me the same 14%

In conclusion my opinion at this point is to mix flips with rentals, keeping the lower profit flips as rentals, and selling the higher profit ones - I feel this is a safe middle ground

Some Great Advice here!

I'll add the details for 2 of my properties that I'm on the fence about.

1) Purchase price: 69k

Renovations: 55k

Mortgage amount (principal, Interest, insurance, & Taxes): $1500

Repairs / Vacancies: $300 

Rental Amount $1800

Holding costs until the Resale/ Refi : $12k 

ARV $185k

2)  Purchase price: 180k

Renovations: 15k

Mortgage amount (principal, Interest, insurance, & Taxes &HOA in this case): $2100

Repairs / Vacancies: $200

Rental Amount $2300

Holding costs until the Resale/ Refi : $12k

ARV $259k

Keep the great responses coming!

Approximately 200k and 1700

To clarify, These properties are definitely worth buying because they make good fix and flips. The dilemma is whether I should hold more of them instead for the added benefits of: appreciation, tax benefits, and amortization since I don’t need the flip income to cover my personal and business expenses and I’d have none of my own dollars invested. Let’s assume break even on monthly expenses (all inclusive) vs rental income Thanks again for the insights keep them coming !

I appreciate the responses guys. 

My gut tells me you guys are right which is why I posted the question, however on paper the way it looks to me in theory I'd have Zero dollars invested and I can't imagine not seeing 50% appreciation over 30 years , and at that point I'd have my mortgage paid off as well and own the properties free and clear. 

With 10 properties averaged at 200k , that's $3,000,000 over 30 years or 100k annually. Or with no appreciation, $2,000,000 over 30 years or 67k per year. 

Ideally I'd love to be able to do this with cashflow along time way, however in my area it's much more difficult to find deals that I can pull all my money out AND cash flow after figuring all expenses...

Can you help me better understand why I shouldn't rely on long term appreciation and the mortgage pay-down?

Thanks again for your time!

Isaac

Hi all , I’d like some advice on my BRRRR strategy Currently the properties that I’m BRRRR’ing , at the refinance stage give me back all of my investment and sometimes more than my investment. However many of these rentals are not providing cash flow and some are negative cash flow. I’m comfortable covering the negative cash flow with my Flipping income and keeping a reserve to cover issues that come up I believe that generally it’s a poor business decision to purchase rental properties with no or negative cash flow and relying on appreciation however since my all in cost is zero or negative (because I profit from the refi sometimes) I’m wondering what you all think about doing BRRRR’s with no cash flow or if I’m better off flipping these properties. I’m comfortable holding these properties long term but would be relying on appreciation long term. Thanks in advance for the advice Isaac