Is BRRRR Dead?

Question

Hey Everyone,

Looking to get some input from the group. I’m still relatively new on my investing journey. I’ve completed a few flips over the past two years and have been a PM for a while, and I’m now focusing more on building a long-term rental portfolio.

I’m currently trying to find the right balance between buying rentals strictly for cash flow versus pursuing BRRRR-style deals. With higher rates and pricing, many BRRRRs feel tight, where I’m barely cash flowing after a refi, which makes it harder to justify tying up capital. At the same time, I don’t want to sink too much cash into rentals and limit my ability to keep flipping.

The strategy I’m leaning toward is using flips as the primary capital driver, while aiming to acquire at least one lower-cost rental per flip (around $100k, close to rent-ready) to keep cash outlay reasonable while still building consistent monthly income.

Curious how others have approached this balance, especially in today’s market, and what’s worked (or not worked) for you.

Dan H. · Answer

In virtually all markets, the high LTV loan on the refinance at market terms will create an initial monthly negative cash flow when properly allocating for vacancy and sustained expenses for traditional LTR.   The markets where this might not happen are higher risk, typically historically shrinking markets often class c or below.

Let’s say you buy a class b right n a non-shrinking market, rehab it right, get your high LTV refi to extract all, or nearly all, of your initial investment you likely (virtually certainly with  accurate projection on vacancy and sustained expenses) will have negative cash flow property using traditional LTR.

Does this mean brrrr is dead?  There are a lot of options other than traditional LTR (rent by room, STR, MTR, lease to own, etc).   If you just made $50k in sweat equity, do you care if the hold initially is slightly negative?   Patience in most markets will improve the cash flow.

Certainly brrrr were much easier prior to 2022 when many properties that are a bit negative cash flow today at higher cost LTV had positive cash flow.

I think dead is a bit too strong, but maybe on life support.  At the very least challenging.

Rent to value has never been worse (2 separate studies comparing home ownership to renting both show this).   Even with the recent slight decline in rates, the rates are near the high for this century and a lot higher than 2021.   This makes RE investment more challenging.    More patience, alternative rent models, good value adds, below market financing, etc can all work.  More challenging does not imply impossible.

In my market, I can obtain good value add purchases in good areas, but they will be negative cash flow after the high LTV refi to extract my investment.

Good luck

Rob Gillespie · Answer

BRRRR (Done Right)

BRRRR (Done Wrong)

B – Buy Purchase below market with margin

B – Buy Overpay or buy with thin margins

R – Rehab Renovate on budget, on time

R – Rehab Cost overruns, delays

R – Rent Stable tenant, realistic rents

R – Rent Vacancy, weak tenant, rent shortfall

R – Refinance Appraises as planned, cash-out works

R – Refinance Appraisal misses, rates spike, lender pulls back

R – Repeat Capital recycled, portfolio grows

R – Repossession Debt service fails → default → lender takes control

Andrew Lee · Answer

Here is my tip as a lender. When I do preliminary terms for a Fix and Flip, I educate my clients on what their ROI is. You want to aim for a 30%+ ROI on a Fix and Flip property. 20% would be bare minimum. Anything under I advise my client to either look for another property or negotiate offer price, even if this is a negative to myself and the realtor. It's about a long term relationship, not a quick win.

Rick Pozos · Answer

The great thing is that you do NOT have to follow a strategy completely. You might do a sub-to and rehab it for a flip. You might do a sub-to, rent it for a while, then wrap it. Maybe you find a great owner financed property and keep it as a mid term rental. Maybe you wrap the owner financed property, maybe you buy the owner financed property that needs a bunch of rehab and you do it, then refinance it for better interest rate and keep it as a rental.

You get what I am saying, right?! You can combine strategies to whatever works for that seller or that house or that situation. The more tools you have in your tool belt, the more deals you can do.

Ethan Haigler · Answer

@Sam Clemente I did about 15 BRRRRs this past year personally. The key of course is buying at the right price. I do most of my investing in and around Cleveland where I try to buy at 50-60% of ARV. I also have a private lender that will finance purchases and rehabs with about 5% down. I then insert flips in between to provide pops of further cash flow. Happy to help if you’d like to talk further

Caleb Brown · Answer

It is tough all around but BRRR deals are out there. Good part about this market is you can negotiate. It's a numbers game. Overall margins will be thin for the first part

Drew Sygit · Answer

Everyone thinks they need to offer asking price on rentals!

NOT TRUE!

Run your numbers backwards to determine what to offer.

Yes, you will have to run numbers on a lot of properties and get a lot of offers rejected, but the easy days are over.

Stacy Raskin · Answer

It's important to buy at the right price and you have a contractor and a crew you can trust.

When renting after the remodel, important to understand the rental market and what are the realistic rents an investor can get based on the area, the condition of the property and the time of the year.

Also, will you self manage or have a property management company? Understanding the local tenant laws is important depending on where you're buying or if a new market.

Do you have a lender who understands and specializes in DSCR or fix and flip loans? This is important as it will open up better programs that have shorter seasoning (waiting) periods between loans and potentially better rates and program guidelines. Each lender for these type of loans can have different guidelines so this part is important.

All these parts fit together. I work with investors who are still making money using the BRRRR method. The most successful ones are really knowledgeable on the above for the areas they are working in. Happy to connect to discuss further.

Kenneth Garrett · Answer

@Sam Clemente

Hi Sam, you are correct.  The BRRRR numbers are definitely tight.  They still work, but you may need to be more strategic with your strategy.  I have adjusted to more mid term rentals which will generate 1.5-2.0 times the LTR rents.  There is a cost in furnishing and a little more work , but I don’t find it that difficult.  I use a hybrid system where I will STR and MTR depending on the time of year.  Of course you need to check regulations, but I found it to be very successful.

Shane Ward · Answer

This is what I've been doing since 2018. The BRRRR method has definitely become more difficult. I find that it's the cost of the properties that are the most difficult to work with. Rates are higher than when I started but that is what I expected. I'm leaning more toward flipping new construction if regulations lighten up. Good luck

BRRRR (Done Right)	BRRRR (Done Wrong)
B – Buy Purchase below market with margin	B – Buy Overpay or buy with thin margins
R – Rehab Renovate on budget, on time	R – Rehab Cost overruns, delays
R – Rent Stable tenant, realistic rents	R – Rent Vacancy, weak tenant, rent shortfall
R – Refinance Appraises as planned, cash-out works	R – Refinance Appraisal misses, rates spike, lender pulls back
R – Repeat Capital recycled, portfolio grows	R – Repossession Debt service fails → default → lender takes control

Is BRRRR Dead?

Most Popular Reply