@Uneeq Khan I think of BRRRR as two investments, so 2 separate IRR or return calcs.
First period is through refi, so up until any return of capital, or refi’d cash back.
During this time, all cash inflows and all cash outflows count for the return calculation. All of them.
Second is post refi, which can essentially be infinity if you get all your money since you have 0 net contributions being put in, but have returns.
I’m assuming your occupancy, capex, and maintenance is covered in your rent, so 0 net contribution.
Most common mistake I see: calculating IRR over the full time investment, incl after refi, so many many months or years down the line.
Issue is IRR calcs generally assume you are reinvesting your returned capital at the same return. That is a big assumption and likely not correct.
Chances are you are getting some money back, maybe more or less, holding it for some time, probably a month or week while hunting the next deal, then reinvesting it in something with a different investment profile. Might be better, might be worse. It almost certainly is not the same.
This is why I like XIRR, or running just one simple return calc through up until refi. Careful if your period is not exactly 1 year.
Probably overkill on this topic but wanted to help.
Im still hunting my first deal btw - just so happens I have some experience in related finance fields.
Work on Wall Street, so see this stuff all the time although in a different context.
Will invest in Austin or LA in case anyone wants to chat.
Or discuss good returns :)
Just out of curiosity - how are you running your moh? What resources (calculators/spreadsheets) are you using?
