Do you ever make a BRRRR less nice on purpose?

Question

This might be a weird question, but do you ever avoid making a BRRRR offer too nice?

There seems to be a strange balance in BRRRR rehabs. The appraiser needs to see enough improvement. The tenant needs a clean, durable house that they actually want to live in. The lender needs the property to make sense. But the owner also has to live with every cabinet choice, flooring choice, fixture, appliance, and repair decision after the refi is done.

So where do you draw the line between “nice enough to appraise and rent well” and “too nice for a rental”? Are there upgrades you used to do that you stopped doing after owning the property for a while?

Kevin Sobilo · Answer

@Ali Kalaei, a few thoughts:

1. You can serve only ONE master!

I think you are correct that you can get yourself confused trying to maximize each of those interests that may not align with each other.

2. With a BRRRR, you intend to hold the property and manage it for cash-flow! So, your own interest in a cash-flowing rental property is the master you want to serve IMO.

3. You are not selling the property in the near future, so the aesthetic choices you make now may well be in need of repair, refurbishment, or replacement by the time you actually go to sell.

4. Maximizing for the appraisal isn't your main goal for a good BRRRR. In addition, things like choice of fixtures isn't likely to make a difference and appliances make zero difference.

5. How your tenant will live in the property IS important!

First decide what your goal is? Are you creating a C class property which might be dated but functional for basic workforce housing? Or are you creating something better than that more B class?

6. To make the determination from #5, you first need to understand your market. Expectations from rentals differs from market to market.

7. Identify what the "must haves" are for the rehab you intend and THEN identify a list of "would like to have".

8. No housing gives the occupant everything they wish. So, look at your "would like to have" list and identify the EASIEST and CHEAPEST items you can provide.

For example, maybe adding a dishwasher is easy because there is a 24" cabinet next to the sink that can be removed and you are already doing electrical so adding a GFCI outlet under the sink is minimal cost.

9. By choosing the easiest and CHEAPest items from the optional "would like to have" list you get the biggest bang for your dollar.

10. Since you are holding the property you focus on durability and/or cost to repair.

Drew Sygit · Answer

Simple, learn what "Maintain to the Market" means.

Why over-improve to have tenants trash it?

Why under-improve and attract only bad tenants?

This should be a bigger concern than the highest appraised value possible.

Kenneth Garrett · Answer

@Ali Kalaei

Good question here.  That has a few things you need to consider.  I tend to improve at a higher level so I can out do my competition.  I balance the rehab costs v the rent v the appraisal.  The BRRRR concept is to get as much money back out as you can and theoretically 100% which is very unlikely these days, but not impossible.

It’s just a math problem.  If I rehab for $30K can I get $60K of value.  Kitchens, baths and adding bedrooms without creating an addition.  Manipulating the square footage by converting a dining room into a bedroom or other area gets you the best return.

Don’t overdo the rehab for the area, but definitely do better than your competition it will bring better tenants.  Don’t always go for the highest rent even though you can; those tenants don’t stay long term.  Vacancy and rehabs kill cash flow.

I always have the lease in place during the refinance.  For some lenders I don’t like taking market rent.  It won’t make you very happy.  I can do better than market rent without overpricing the rent.

You have to be the best at this.  25 BRRRR’s and counting.  Working on number 26.

Best of Luck.

Stuart Udis · Answer

@Ali Kalaei Your post highlights one of the biggest weaknesses of the BRRRR model: it's relatively easy to manufacture a successful outcome through renovation decisions.

The appraiser is rarely scrutinizing major capital expenditure items—such as roofs, mechanical systems, plumbing, or electrical infrastructure—the same way a buyer's home inspector would. As a result, there can be a significant gap between a property's appraised value and what it would actually command on the open market, creating a misleading impression of its true value.

Many investors also prioritize maximizing the spread between their all-in cost and the projected appraised value because return on capital is the primary objective. That incentive can lead to shortcuts during the rehabilitation process or using the cheapest materials which don't hold up. The problem is that once a tenant moves in, deferred maintenance and repair issues begin to surface, and much of that ROC gets reinvested right back into the property.

The concept of acquiring real estate that can be improved and ultimately be worth 20–30% more than its all-in cost is an excellent strategy—but only when the value increase is created through quality improvements that are durable and can withstand tenants and most importantly the scrutiny of a sale process.  In my experience, many BRRRR projects look great at refinance but far less impressive when evaluated based on what a knowledgeable buyer would actually pay for the property.

Jules Aton · Answer

Twenty years ago you could get away with a fluff up on a property in a hot inner city neighborhood. They would still line up to rent at a small discount despite white appliances, formica counter tops and sheet goods in kitchen and baths because they wanted the neighborhood. I don't think people would go for that now it seems stainless appliances and stone counter tops are expected or the property deemed uninhabitable.

J Castro · Answer

From a lender’s perspective, we generally aren’t looking for luxury finishes—we’re looking for value, marketability, and sustainability.

The best BRRRR projects are typically those that improve the property’s condition and functionality without over-improving it for the neighborhood. An investor can easily spend money on upgrades that look great but don’t translate into a higher appraised value or increased rental income.

What lenders and appraisers like to see are improvements that support the property’s market value and rental demand:

• Updated kitchens and bathrooms• Safe and functional electrical, plumbing, and HVAC systems• Durable flooring and finishes• Strong curb appeal• Deferred maintenance addressed• A property that can attract and retain quality tenants

The key is making the property competitive within its market. If comparable rentals have laminate countertops and standard appliances, installing luxury stone countertops and high-end appliances may not significantly increase the appraised value or rental rate.

For BRRRR investors, the goal is usually maximizing ROI, not maximizing renovation costs. The most successful projects tend to be those where every dollar invested has a clear purpose—either increasing value, improving rentability, or reducing future maintenance expenses.

A property doesn’t need to be the nicest rental in the neighborhood; it needs to be one that tenants want to rent and that supports the refinance based on local comparable sales and rental income.

Shiloh Lundahl · Answer

@Ali Kalaei Yes, there are times that I absolutely don't do almost anything to a property other than clean it. The big question becomes what is my strategy with the property and also how does the property smell. If the property stinks, then it doesn't matter if it looks great. Almost no one wants to live in a stinky property. I would have to rehab it in order to get rid of the smell.

There are ways to buy a property that will make it appraise at what the value should be even when you don't do much to the property. And it makes refinancing the quickly and easy without needing to wait the seasoning time period.

Here is an example:

I bought a property off of Facebook marketplace. The first property I've ever bought off of Marketplace. The property looked like it was all fixed up and so I reached out to the seller and it turns out he had two properties and he had to fire sale one of them in order to keep the other. This was on a Wednesday and I told him I could buy the property from him and close by Friday. He sold me what he had into the property. I bought it for $186,000 on Friday with a hard money loan. I then spent $200 to buy staging materials at Walmart and I went over there with a broom and a rag, and I wiped things down and swept. Within 9 days I rented it out on a lease with the option to buy and the tenant buyer gave me a $4000 option fee to buy the property within the next three years. The property appraised at $245,000 and I closed on the refinance within about 30 days of the purchase of the property with a loan for $187,000. I had to leave into the property about $10,000 of my own money but I was able to create about $45,000 of equity over and above the $10,000 left in the property.

You just need to know how Appraisers appraise properties and howlenders view properties and underwrite them and you can figure out ways to get around the seasoning period.

Good luck Ali. Let us know how it goes for you.

Jaycee Greene · Answer

Hi @Ali Kalaei! How much rehab are you looking to do on your rentals? Light/cosmetic? Medium to Heavy? I assume you're not looking to do gut rehabs...

Do you ever make a BRRRR less nice on purpose?

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