Is BRRR dead in 2024???

BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Is BRRR dead in 2024???

Luis Ramos
Member since 2018 · 28 posts · 23 votes

Nothing cash flows at interest rate of 8% and property taxes at 3% (in Texas). 

Although I did 12 BRRR deals, in my opinion it is dead in 2024!!!


Prove it otherwise, preferably with HUD statements.

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Dean HarrisBusiness Member
Real Estate Agent · Memphis, TN · Member since 2015 · 1k+ posts · 1k+ votes
2y

I BRRRR's 17 homes myself in 2023 in Memphis, TN. Not dead in Memphis.

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    2y

    Never say never....you're right that with those numbers, it'll be real tough, but you just look for a cheaper buy-in. Might have to go for a severe fixer....?

    It's all just numbers. Yeah, a lot tougher than it used to be....

    But that scares off the rookies, creates more opportunities for veterans like you...

    1Reply
  • Ron Brady
    Rental Property Investor · Burlington County, NJ · Member since 2019 · 540 posts · 771 votes
    2y

    We've not found anything worthwhile for some time. But we're always looking. 

    2Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    2y

    Ask the investors who are still buying there every day for help? I assume they are simply finding better deals or collecting higher rents through STR or MTR. Or maybe both? Otherwise find a better market. For example. If someone else posted your exact same message about San Francisco or NYC last year you would have suggested they try Texas.

    0Reply
  • Bonnie LowPro Member
    Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
    2y

    Are you just looking to confirm your statement about BRRRR in Texas or are you asking if there are other markets where it does still work?

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    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Luis Ramos

    Brrr will still work but it’s not going to allow you to get 100% if your money back like you could in the past and that may not happen for a very long time since it’s doubtful rates will go back below 4% anytime soon.

    This doesn’t mean you cannot buy a property - rehab it and have equity in it and still have it cash flow - it’s just a lot harder to find those deals and it won’t be on mls

    Personally contrary to many on here , the past year + have been an awful time to invest in real estate as rates are were rising and prices are falling

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  • Adam WindhamPro Member
    Lender · San Diego | Phoenix | Miami · Member since 2019 · 39 posts · 65 votes
    2y

    Always market and deal specific, but yes the higher interest rates have made fewer deals pencil out. That being said, if you can find a deal that works in a downmarket you'll likely be in that much better of a position when things turn around. You should have some tailwinds next year with interest rates anticipated to be trending down through 2025. 

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  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    2y

    @Luis Ramos

    I agree. I'm in the DFW area and it's extremely hard to have a successful BRRRR around here.

    1Reply
  • Jake BakerBusiness Member
    Flipper/Rehabber · San Diego, CA · Member since 2020 · 1k+ posts · 695 votes
    2y

    @Luis Ramos

    I agree with @Chris Seveney that BRRRRs may not be perfect, but they are not dead. We BRRRR 1/3 of projects and flip the other 2/3 to supplement and money left in the BRRRRs. We focus on refinancing the properties that we like the best in the best locations for long term growth and flip the others.

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  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    2y

    We're still funding both ends of the BRRRR every day for a living. It's definitely market dependent. Texas property taxes kill cash flow in many parts of the state but not all. (I've seen some decent deals lately come through in San Antonio). BRRRR is alive and well in the markets it always thrived in like Memphis, Cleveland, Saint Louis, Philadelphia, etc where the prices are supported by the rents even with higher interest rates.

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Luis Ramos:

    Nothing cash flows at interest rate of 8% and property taxes at 3% (in Texas). 

    Although I did 12 BRRR deals, in my opinion it is dead in 2024!!!


    Prove it otherwise, preferably with HUD statements.


     It's not dead, but it is tight. 

    I would say that if you are conservative with your numbers and can have an exit lined up before even putting an offer, it is very possible still. 

    Rates have been coming down and we are seeing DSCR priced in the 7s. Multifamily and states with lower property values and high rents, Ohio, TN, and NC have been performing well.

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  • David Sanchez
    Member since 2023 · 5 posts · 2 votes
    2y

    Hi Luis!

    I'm very new to all this investing stuff (2 weeks in) but I thought this post might help, where you can use the 3rd option below to have a 0% interest rate. Let me know if this is something that can help you employ the BRRR method more often for it not to be considered a useless long-term cash flow method. I've heard that BRRR is mainly used for apartments and works if done correctly but requires a large sum of money down compared to a normal sfh.

    Quote from @Jorge Ruiz:

    @Adam Bradley

    This is a bit lengthy but ready through as it is very informative. I am looking to doing option #3.

    1. The Conventional Rules For a Cash Out Loan

    Fannie Mae and Freddie Mac are the Government Agencies that sponsor conventional lending. Most banks will have these loans as an option. There are other loan types as well but for brevity we will limit this post to the “Conventional” lending (Fannie/Freddie).

    • Conventional Loans limit your cash out on an investment property to 75% of the “After Repair Value” on a Single-Family home (70% on a 2-4 unit home). This is also the same percentage that you need for a non-cash out refinance (more on why that is important later).
    • If you purchased the investment property with a loan, then conventional loans will require you to wait 6 month to take cash out.
    • This rule does not apply if you purchased the home with CASH (more on that in section 2).

    Let’s explore some examples here:

    If you purchased a property with a 15% down conventional loan (85% loan to value) and you wanted to get cash out, you wouldn’t be able to do so since the cash out limit is 75% of the “Loan to Value”. The MAXIMUM cash out you can receive is 75% of the value of the property.

    If you purchased a property with a loan, but did the rehab on with your own cash, then you would need to wait 6 months to get that cash back. Keep in mind you could only receive 75% back of the After Repair Value.

    So if you bought a home with a loan of $50k, it required $30k in renovations, and it appraised for $100k after the repair work was complete then….

    You would refinance the $50k loan, receive back $25k in cash…since $75k would be 75% of the After Repair Value.

    2. Buying a home with Cash

    Buying a home with cash has become increasingly popular for many investors but often an investor will be caught with the restrictions to cash out loans if they need to get their money back. There is a plan to avoid this entire section (In section 3) but it is important for us to know about these restrictions. If an investor is buying with cash and flipping they get their money back when they sell the property. But if they are seeking to hold a property for any length of time and want their cash investment back there are some important rules to understand with conventional loan:

    If you buy a property with cash (or with a HELOC) you can receive a cash out loan on Day 1.

    There is not a 6 month waiting period with receiving a cash out loan if you purchased a home with cash or with a HELOC

    BUT you will be limited to the amount of….

    Your purchase price + closing costs (costs when you purchased the home)

    OR

    75% of the “After Repair Value”…

    WHICHEVER IS THE LOWER AMOUNT (super important)

    These rules are important to understand so here are two examples:

    Example 1: If you purchased a home with $50k of cash, and put $30k of renovations into the loan, and the home was worth $100k. 75% is $75k and $50k is your purchase price. So you could only receive $50k in your first 6 months ofownership since the LOWER amount is your purchase price. After 6 months you could receive the full 75% of the ARV.

    Example 2: If you purchased a home with $80k of cash, put $5k into the home, and the home was worth $100k. 75% would be $75k and your purchase price is $80k…so the lower amount is $75k.

    When buying a home with cash you can absolutely get cash back right away but you will be limited to the lower of those two amounts.

    3. HOW TO PROPERLY STRUCTURE BUYING A HOME WITH CASH

    With these rules, you can see how it can be confusing to get conventional lending when buying a home with cash but there is absolutely a proper method to structuring your deals when buying cash. Here’s the secret:

    Create an LLC and have the LLC lend you a mortgage on the property you are receiving.

    The reason why this works is because instead of you needing cash or receiving a cash out loan, we are now refinancing a loan – your loan. There no reason to wait any time or have any “whichever is lower” rule come into play. We are just refinancing a loan.

    Here’s how it works:

    You create an LLC

    You buy a home

    Your LLC gives you a loan for the home

    You file the deed for that loan at the county courthouse

    You use the money from the LLC to buy and fix up the property

    Once the property is completed, your conventional lender comes to refinance the loan

    Your conventional lender runs title and sees there is a loan.

    Your conventional lender refinances you into a new loan, and cuts a check to your LLC in the amount of 75% of the value.

    Please don't confuse this 75% with a "cash out" amount. The non-cash out LTV on a refinance is also 75%. We are refinancing a mortgage. Your LLC's mortgage. Essentially your LLC has become the bank/hard money lender/etc. However you want to think about it. You get to set the interest rate (it can be 0%) and you get your investment amount back sooner.

    Some things to think of:

    To file a deed at the county courthouse is $100-$150 in cost (depending on which county)

    And you want that note to be pretty close to 70% of the ARV for the property if you don't want to bring any money to closing. 70% will allow you to roll in your closing costs. If you want it to be at 75% just keep in mind you would need to bring your closing costs out of your pocket to complete the refinance.

    1Reply
  • David Sanchez
    Member since 2023 · 5 posts · 2 votes
    2y

    Here's the link for the og post: 

    https://www.biggerpockets.com/forums/311/topics/490777-brrrr-how-long-until-i-can-refi

    0Reply
  • Elizabeth LawrenceBusiness Member
    Lender · OH · Member since 2022 · 18 posts · 7 votes
    2y

    What is your definition of a good BRRRR property? Is it a perfect BRRRR where you are getting all of your funds back from the purchase back on the refinance? Or is a good BRRRR a deal that you leave 5% 0r 10% in the deal which is still better than buying something turnkey with 20% down.

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  • Alfath AhmedBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
    2y
    Quote from @Luis Ramos:

    Nothing cash flows at interest rate of 8% and property taxes at 3% (in Texas). 

    Although I did 12 BRRR deals, in my opinion it is dead in 2024!!!


    Prove it otherwise, preferably with HUD statements.


    I am seeing a lot of BRRRR, value-add, and fix & flip opportunities popping up here in the Columbus market where I am investing. Markets like TX have become tough to do BRRRR's. Midwest all-day long in this decade to build generational wealth.

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  • John McDonald
    Member since 2023 · 158 posts · 96 votes
    2y

    You have to be willing to fix up the properties but they can still be found.

    0Reply
  • Robert EllisBusiness Member
    Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
    2y
    Quote from @Luis Ramos:

    Nothing cash flows at interest rate of 8% and property taxes at 3% (in Texas). 

    Although I did 12 BRRR deals, in my opinion it is dead in 2024!!!


    Prove it otherwise, preferably with HUD statements.


     new construction my friend. we build for investors and they have tons of equity and cash flow in columbus. look into other strategies 

    [email protected]786-494-6766
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  • John McDonald
    Member since 2023 · 158 posts · 96 votes
    2y
    Quote from @Robert Ellis:
    Quote from @Luis Ramos:

    Nothing cash flows at interest rate of 8% and property taxes at 3% (in Texas). 

    Although I did 12 BRRR deals, in my opinion it is dead in 2024!!!


    Prove it otherwise, preferably with HUD statements.


     new construction my friend. we build for investors and they have tons of equity and cash flow in columbus. look into other strategies 


     Hi Robert, are you referring to the "build to rent" approach? I agree, this is working in Texas too. 

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    2y
    Quote from @Alex Bekeza:

    We're still funding both ends of the BRRRR every day for a living. It's definitely market dependent. Texas property taxes kill cash flow in many parts of the state but not all. (I've seen some decent deals lately come through in San Antonio). BRRRR is alive and well in the markets it always thrived in like Memphis, Cleveland, Saint Louis, Philadelphia, etc where the prices are supported by the rents even with higher interest rates.


    0Reply
  • Dean HarrisBusiness Member
    Real Estate Agent · Memphis, TN · Member since 2015 · 1k+ posts · 1k+ votes
    2y

    I BRRRR's 17 homes myself in 2023 in Memphis, TN. Not dead in Memphis.

    CrestCore Realty4.713 Reviews
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    6Reply
  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    2y

    @James Wise

    [email protected]818-606-8823
    Investor Property Loan5306 Reviews
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    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    2y
    Quote from @Alex Bekeza:

    @James Wise


    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y
    Quote from @David Sanchez:

    Hi Luis!

    I'm very new to all this investing stuff (2 weeks in) but I thought this post might help, where you can use the 3rd option below to have a 0% interest rate. Let me know if this is something that can help you employ the BRRR method more often for it not to be considered a useless long-term cash flow method. I've heard that BRRR is mainly used for apartments and works if done correctly but requires a large sum of money down compared to a normal sfh.

    Quote from @Jorge Ruiz:

    @Adam Bradley

    This is a bit lengthy but ready through as it is very informative. I am looking to doing option #3.

    1. The Conventional Rules For a Cash Out Loan

    Fannie Mae and Freddie Mac are the Government Agencies that sponsor conventional lending. Most banks will have these loans as an option. There are other loan types as well but for brevity we will limit this post to the “Conventional” lending (Fannie/Freddie).

    • Conventional Loans limit your cash out on an investment property to 75% of the “After Repair Value” on a Single-Family home (70% on a 2-4 unit home). This is also the same percentage that you need for a non-cash out refinance (more on why that is important later).
    • If you purchased the investment property with a loan, then conventional loans will require you to wait 6 month to take cash out.
    • This rule does not apply if you purchased the home with CASH (more on that in section 2).

    Let’s explore some examples here:

    If you purchased a property with a 15% down conventional loan (85% loan to value) and you wanted to get cash out, you wouldn’t be able to do so since the cash out limit is 75% of the “Loan to Value”. The MAXIMUM cash out you can receive is 75% of the value of the property.

    If you purchased a property with a loan, but did the rehab on with your own cash, then you would need to wait 6 months to get that cash back. Keep in mind you could only receive 75% back of the After Repair Value.

    So if you bought a home with a loan of $50k, it required $30k in renovations, and it appraised for $100k after the repair work was complete then….

    You would refinance the $50k loan, receive back $25k in cash…since $75k would be 75% of the After Repair Value.

    2. Buying a home with Cash

    Buying a home with cash has become increasingly popular for many investors but often an investor will be caught with the restrictions to cash out loans if they need to get their money back. There is a plan to avoid this entire section (In section 3) but it is important for us to know about these restrictions. If an investor is buying with cash and flipping they get their money back when they sell the property. But if they are seeking to hold a property for any length of time and want their cash investment back there are some important rules to understand with conventional loan:

    If you buy a property with cash (or with a HELOC) you can receive a cash out loan on Day 1.

    There is not a 6 month waiting period with receiving a cash out loan if you purchased a home with cash or with a HELOC

    BUT you will be limited to the amount of….

    Your purchase price + closing costs (costs when you purchased the home)

    OR

    75% of the “After Repair Value”…

    WHICHEVER IS THE LOWER AMOUNT (super important)

    These rules are important to understand so here are two examples:

    Example 1: If you purchased a home with $50k of cash, and put $30k of renovations into the loan, and the home was worth $100k. 75% is $75k and $50k is your purchase price. So you could only receive $50k in your first 6 months ofownership since the LOWER amount is your purchase price. After 6 months you could receive the full 75% of the ARV.

    Example 2: If you purchased a home with $80k of cash, put $5k into the home, and the home was worth $100k. 75% would be $75k and your purchase price is $80k…so the lower amount is $75k.

    When buying a home with cash you can absolutely get cash back right away but you will be limited to the lower of those two amounts.

    3. HOW TO PROPERLY STRUCTURE BUYING A HOME WITH CASH

    With these rules, you can see how it can be confusing to get conventional lending when buying a home with cash but there is absolutely a proper method to structuring your deals when buying cash. Here’s the secret:

    Create an LLC and have the LLC lend you a mortgage on the property you are receiving.

    The reason why this works is because instead of you needing cash or receiving a cash out loan, we are now refinancing a loan – your loan. There no reason to wait any time or have any “whichever is lower” rule come into play. We are just refinancing a loan.

    Here’s how it works:

    You create an LLC

    You buy a home

    Your LLC gives you a loan for the home

    You file the deed for that loan at the county courthouse

    You use the money from the LLC to buy and fix up the property

    Once the property is completed, your conventional lender comes to refinance the loan

    Your conventional lender runs title and sees there is a loan.

    Your conventional lender refinances you into a new loan, and cuts a check to your LLC in the amount of 75% of the value.

    Please don't confuse this 75% with a "cash out" amount. The non-cash out LTV on a refinance is also 75%. We are refinancing a mortgage. Your LLC's mortgage. Essentially your LLC has become the bank/hard money lender/etc. However you want to think about it. You get to set the interest rate (it can be 0%) and you get your investment amount back sooner.

    Some things to think of:

    To file a deed at the county courthouse is $100-$150 in cost (depending on which county)

    And you want that note to be pretty close to 70% of the ARV for the property if you don't want to bring any money to closing. 70% will allow you to roll in your closing costs. If you want it to be at 75% just keep in mind you would need to bring your closing costs out of your pocket to complete the refinance.

    Yes, there is that way. There's also the way if you want to keep the cash purchase house under lower equity you don't re-fi out so if lawyers try to come after you after looking at your LLC they'll realize equity is really low. And pass on a nonsense complaining pro-bono suit from a tenant.

    0Reply
  • Robert EllisBusiness Member
    Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
    2y
    Quote from @John McDonald:
    Quote from @Robert Ellis:
    Quote from @Luis Ramos:

    Nothing cash flows at interest rate of 8% and property taxes at 3% (in Texas). 

    Although I did 12 BRRR deals, in my opinion it is dead in 2024!!!


    Prove it otherwise, preferably with HUD statements.


     new construction my friend. we build for investors and they have tons of equity and cash flow in columbus. look into other strategies 


     Hi Robert, are you referring to the "build to rent" approach? I agree, this is working in Texas too. 


     We studied probably 200 hours of new build stats in our market. soft markets, good markets, to design a floorplan. we found that the ideal sq ft is 1850 and 4 beds 3 bath 2 car garage. I have builders we work with and myself who build for private equity firms and low income housing at a pretty good price. The delta between build cost and resale needs to be large enough for an investor. so we sell to investors who build them to rent or who sell them spec to make income. both work. we build at enough equity for them. our fee is somewhat flexible but our typical minimum fee to do this is $50,000. I'm building 15 this year. 

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  • Jack Seiden
    Real Estate Agent · Washington DC · Member since 2016 · 847 posts · 654 votes
    2y
    Quote from @Luis Ramos:

    Nothing cash flows at interest rate of 8% and property taxes at 3% (in Texas). 

    Although I did 12 BRRR deals, in my opinion it is dead in 2024!!!


    Prove it otherwise, preferably with HUD statements.

    Honestly yeah, and at least in the markets a look at, in most cases the pp+rehab is often more than turn key, there are all kind off issues betwwen low inventory & high rates but an underrated one is just rehab expenses have skyrocked while gross margin's have decreased. most deals I see don't only fail as brrr's but if I wanted to own in that area i'd be better buying turn key.
    0Reply
  • Mike Gagnon
    Contractor · Edwardsville IL · Member since 2022 · 3 posts · 1 vote
    2y

    I am currently in a deal right now that I believe will work out perfectly. I've had to adjust my expectations, and get creative on keeping my budget lean, but I found a nice off market deal that I should be zero out of pocket after refinance but will not have positive cash flow, net zero. I still look at this as a win getting close to 70k equity built up with no out of pocket expense. I think the BRRRR works today but you will not see the cash flow like you did before but it doesn't mean this is no longer a great strategy for accumulating property and will just be a longer end game while still building your portfolio.

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