Did low rates ruin BRRRR expectations?

Question

Feels like a lot of BRRRR deals worked a few years ago simply because money was cheap.

Investors could overpay a bit, miss rehab numbers, refinance easily, and still come out okay. Now it feels like every mistake gets exposed fast.

I’m noticing the investors still buying are just way stricter on their numbers now. Tighter entry prices, more conservative rehab budgets, and less dependence on appreciation saving the deal.

Do you think BRRRR actually got harder… or are we just seeing the market correct years of aggressive underwriting?

Eric Fernwood · Answer

Hello Frank,

The market corrected years of aggressive underwriting. Low rates just hid it.

When money was cheap, investors could overpay, miss renovation budgets, and still refinance into debt that made the numbers work. The strategy did not change. The financing environment did, and it exposed every deal that only worked because money was unusually cheap.

The math makes this clear. A $400,000 loan at 3.5% costs roughly $1,350 per month in principal and interest. At 6.5%, that payment climbs to around $1,900. That extra $550 has to come from somewhere. Since rents are set by the market, not the investor, it has to come out of cash flow. Fewer properties now qualify for a successful cash-out refinance.

The investors still buying have adjusted. They are tighter on acquisition prices, more conservative on renovation budgets, and no longer counting on cheap refinancing to rescue a deal that does not work on day one. That is not a harder strategy. That is the strategy working as intended.

Mohammed Rahman · Answer

I don’t think BRRRR itself changed as much as the environment around it did.

A few years ago, cheap debt and fast appreciation could cover a lot of mistakes. If you went a little high on the purchase price or the rehab ran over budget, the refinance and rising values often helped clean things up on the back end.

Today it feels completely different. There is no easy exit built in. You have to be right on the purchase, the rehab scope, the rent projections, and the timeline. If even one of those pieces is off, the entire deal feels it.

So to me, it is not that BRRRR suddenly became a bad strategy. It just feels like the training wheels came off. The strategy still works, but it only works when you execute with more precision and build in real margin from the start.

What I find interesting is that the investors who are still active right now are usually the ones who were conservative even during the easy money years. Their approach did not change. The market simply stopped bailing people out.

Caleb Brown · Answer

I think COVID was the unicorn years and we are back to reality. Anybody was able to BRRR back then due to rising prices and cheap money, not the same this year or recently

Caleb Brown · Answer

Right, it was a once in a lifetime occurance

Frank Ransom · Answer

I've been telling my investors the same. The majority view it as a painful time to be an investor, but the reality is that we are just moving from a dream back to regulation. That's an EXPERIENCED catch.