Updated over 4 years ago on . Most recent reply
Downsides to BRRRR?!
Hey everyone! Obviously we all love using the BRRRR method to supercharge our wealth in real estate, but what are some downsides that you guys can think of that a newbie should beware of? I have a solid understanding of how the BRRRR method works but have never actually done it before and plan to use it for my first deal!
Any insights appreciated!😎
Most Popular Reply
The downside is that BRRRR strips equity out of the property and reduces cash flow. The could be a problem if rents drop, you experience prolonged loss of rents or if you are forced into a situation where you need to sell the property. If you have cash reserves, this risk can be mitigated.
Other risks of BRRRR can happen earlier in the BRRRR process. Underestimating rehab costs or overestimating after rehab value, can result in less cash out during the refinance. It is not uncommon for properties to appraise lower than expected.