The Biggest Mistake I’m Seeing with BRRRR Deals Right Now
Frankie VozziBusiness Member
Member since 2025 · 369 posts · 90 votesThe Biggest Mistake I’m Seeing with BRRRR Deals Right Now
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Specialist · NJ · Member since 2022 · 1k+ posts · 653 votes
6moThere's lots of moving parts for the BRRRR strategy if you want to exit with all your money out. Your entry number. Rehab Execution. Rent. Interest rates. Credit.
If you buy high and your rehab execution goes awry, you won't even have to worry about DSCR constraints cause you may be wholesaling out for a loss.
If you have the capital that allows you to source correctly, and you have a team that is on YOUR side. Not their own side. Not the market's side. Then yes, in theory, it can work.
Execution risk is high for the BRRRR. If the investor does not wear one of the hats (Agent, GC), it is tremendously high. I've had clients who used the small mom and pop GC and I have had clients that used the more professional firm type. Issues arose regardless. Timelines went longer, budgets needed extra cash.
Plus when you buy wholesale when starting the BRRRR all the closing costs are on you. All title, all RE commissions, All transfer taxes. Most times that is an extra 10k+.
The reason why people can't get their money out is because they have no wiggle room. They need a perfect outcome to all variables just to reach that theoretical number their formula provided them.
When you buy high, and the rehab runs long and over budget, and the rent is .7% of the value, you're not getting your money back. It's staying in.
When you buy low, do simple rent ready rehabs, the DSCR constraints disappear.
I just recently bought a house at auction for 73k. The house next door to mine which is exact same house in a "fixer upper" condition is listed for 118k. That's a 40% discount. If this houses needs 70k to be reant ready let's say and the ARV is 250k.
My project cost is 143k. That's 57.2% of ARV
You buy off of the MLS and the project cost is 118k (plus closing costs) plus 70k rehab. Let's call it 190k. That is 76% of ARV
How you buy makes all the difference in the world.
10 Replies
- 6moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 513 votes
Full BRRRRs can work- it helps to be realistic in estimating the true rehab costs and being realistic about the ARV and expected rents. From what I've heard from investors and in my own experience, this gets easier over time with more experience doing the rehab or working with a team who does the rehab, being more confident based on experience on how long the rehab will take depending on the project and doing market research and/or having actual experience with the rental market. Also, there are DSCR products that will work off of a DSCR 1 ratio or for an easy math example of $1,000 of rent paying for a $1,000 of expenses with the mortgage property, taxes and insurance (and HOA if applicable). There are no seasoning or shorter seasoning DSCR options but it will depend on the property location. There will be more lending options the longer the seasoning or time between the last transaction on the property and the next transaction.
Bright Skyline518 Reviews - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes6moThere are many things that can go wrong with this strategy, starting out with underestimating the renovation cost, and underestimating or overestimating what you're going to get in rent. You are 100% correct about the refinancing. I've mentioned in prior posts that many people think if they get a DSCR loan, their credit does not matter, but credit is a major factor in the loan terms and rates you get on these types of loans. You have to also make sure ahead of time that you are financeable.
7e investments53 Reviews - Specialist · NJ · Member since 2022 · 1k+ posts · 653 votes6mo
There's lots of moving parts for the BRRRR strategy if you want to exit with all your money out. Your entry number. Rehab Execution. Rent. Interest rates. Credit.
If you buy high and your rehab execution goes awry, you won't even have to worry about DSCR constraints cause you may be wholesaling out for a loss.
If you have the capital that allows you to source correctly, and you have a team that is on YOUR side. Not their own side. Not the market's side. Then yes, in theory, it can work.
Execution risk is high for the BRRRR. If the investor does not wear one of the hats (Agent, GC), it is tremendously high. I've had clients who used the small mom and pop GC and I have had clients that used the more professional firm type. Issues arose regardless. Timelines went longer, budgets needed extra cash.
Plus when you buy wholesale when starting the BRRRR all the closing costs are on you. All title, all RE commissions, All transfer taxes. Most times that is an extra 10k+.
The reason why people can't get their money out is because they have no wiggle room. They need a perfect outcome to all variables just to reach that theoretical number their formula provided them.
When you buy high, and the rehab runs long and over budget, and the rent is .7% of the value, you're not getting your money back. It's staying in.
When you buy low, do simple rent ready rehabs, the DSCR constraints disappear.
I just recently bought a house at auction for 73k. The house next door to mine which is exact same house in a "fixer upper" condition is listed for 118k. That's a 40% discount. If this houses needs 70k to be reant ready let's say and the ARV is 250k.
My project cost is 143k. That's 57.2% of ARV
You buy off of the MLS and the project cost is 118k (plus closing costs) plus 70k rehab. Let's call it 190k. That is 76% of ARV
How you buy makes all the difference in the world.
- 6moSteven WesolowskiPro MemberRealtor · San Antonio, TX · Member since 2023 · 277 posts · 42 votes
BRRRR deals are still hot in San Antonio. Preferred renters are an all-time high. I even have a deal in one of the highest desirable areas to live where the tenants are moving out and makes a perfect house flip or rental since it's a property that contains an attached ADU.
A lot of our packaged deals of several multifamily 2 - 4 are getting snatched up at higher rates than small 10 - 20 door apartments. The most intriguing deal I saw get snatched up by someone else before I could get to it were two neighbored lots accompanying up to 5 doors with at least two the existing being rented out.
We have even recently had an uptick in folks seeking large single family houses that can be split into rental by the room. You’re spot on—this is exactly what a lot of investors are running into right now.
The refi piece has become the weakest link in the BRRRR model. Between tighter DSCR requirements, conservative appraisals, and stricter seasoning on some products, the "pull all your cash out" outcome is a lot less common than it was a couple years ago.
What I’m seeing too:
- Many deals are turning into partial BRRRRs (leaving 15–30% in)
- Rents are coming in close, but not always strong enough to comfortably hit DSCR at today's rates
- Lenders are underwriting more cautiously on both value and income
The investors doing well are exactly like you said—buying deals that:
- Still work if they only get 70–75% LTV
- Cash flow even with slightly lower rents or higher rates
- Have a Plan B (rent as-is, mid-term rental, or even sell if needed)
Full BRRRRs aren’t gone, but they’re definitely more deal-specific now—not something you can assume going in. Underwriting conservatively upfront is what’s separating solid deals from surprises on the backend.
- 6moRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Frankie Vozzi:
A lot of BRRRR deals still look great on paper but the execution is getting trickier. The biggest issue I'm seeing lately is overestimating the refinance step.
Specifically: Assuming full ARV on refi, Not accounting for seasoning requirements, Rent not supporting the expected DSCR, So investors go in expecting to pull most (or all) of their cash out and end up leaving more in the deal than planned. That doesn't make it a bad deal but it changes the return significantly.
The BRRRR deals working best right now are the ones that: Still make sense with a delayed or partial refi, Don't rely on perfect numbers. Have a backup exit if needed
Curious are you guys still seeing full BRRRRs in your markets, or more partial ones lately?
I'd add not being aware of lender "recent listing" requirements - a lot of DSCR Lenders recently have tightened up regarding a valuation (appraisal) not being able to be above a listing price it didn't sell at in the prior six months or so, even if it comes back at the full ARV (i.e. "market knows better")
Harpoon Capital514 Reviews The appraisal has been a risk for as long as I have been doing this. Refi appraisals are more conservative in my market than appraisals associated with offers. It has been this way since my first brrrr over a dozen years ago. This is something you can easily account for in your underwriting. Just take 5% to 10% off the expected selling appraisal value as your refi value.
More recently, the increase loan rates that started q2 2022 have meant that after the high LTV refi the properties in my market, and virtually all other large city markets per two fairly recent studies, the property has negative cash flow (in my market large negative cash flow). The investors doing brrrrs in my market prior to 2022 have either shifted mostly to flipping or are taking a sabbatical. My last two planned BRRRRs I never did the refi due to rate increase so my equity position is higher than I desire. I am more concentrating on sophisticated value adds (anywhere) or STRs in places that are in highly desire locations.
Best wishes
- Investor · Tampa, FL · Member since 2026 · 24 posts · 18 votes5mo
Partial BRRRRs are pretty much all I'm seeing in my market right now. I've done three DSCR refis across Tampa and Ocala and only one came close to a full cash-out. The other two I left 15-20% in.
The refi math itself isn't the problem. If you underwrite at 75% LTV and price in rates at 7.5-8%, you can tell pretty quick whether a deal works. The problem is what changes between when you run those numbers and when you actually go to refi six months later.
In Florida the big one is insurance. I've had quotes come back 30-40% higher than what I modeled going in, and that single line item dropped my DSCR below what the lender needed. Tax reassessment is the other one. County bumped the assessed value on one of my earlier deals within months of closing and that changed my monthly by about $200. Neither of those show up in your initial underwriting if you're using the seller's numbers.
I still do BRRRRs but I go in assuming I'm leaving money in. If the deal only works as a full cash-out refi I move on.
- 5moJorge VazquezBusiness MemberReal Estate Broker · Tampa, FL · Member since 2017 · 1k+ posts · 694 votes
Yeah I'm seeing the same thing right now, and honestly I've been doing this for over 20 years and own about 50 properties, way before anyone was even calling it BRRRR. The strategy still works, but the mistake I keep seeing is expectations. People go in thinking they'll get all their money back in 3 months, and that's just not how it's playing out anymore. I've always treated a full cash-out as a bonus, not the plan. If I can get around 50% back and the deal still cash flows or builds equity, I keep moving. Some deals refi in 6 months, some take a year or even longer, and that's fine. Moving fast matters, but expecting perfection will hurt you, and waiting for the perfect deal will freeze you. The real win is staying consistent, being realistic, and stacking deals over time instead of trying to hit a home run every time.
Graystone Investment Group517 Reviews - Realtor · Tampa, FL · Member since 2020 · 41 posts · 15 votes5mo
Same here. I have termed it a "dirty BRRRR"
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