Should I rethink using BRRRR as my entrance strategy given the tariff environment?

Question

Hello! I am the rookiest of rookies having just joined the community last week. I’m currently saving to invest in my first property. I work full-time so all cash flows will be reinvested to build my portfolio. I would like to purchase a multi-family property for long term rental, market still undecided as I’m learning. I am very interested in the BRRRR method but I’m wondering if that strategy will be unrealistic in the next 6 months given the cost of materials, and possibly labor, is projected to increase. Should I be rethinking my strategy? As a family of 5 we aren’t interested in house hacking so I’m interested to learn how other investors are approaching this new economic landscape.

Bryce Jamison · Answer

For everyone thinking about getting into real estate investing, I recommend spending at least 6 months educating yourself through websites likes this and its family of books and podcast, other real estate podcast, books at the library, and local meetups. After 6 months you'll know what strategy you want to deploy, and have the confidence and knowledge to do it.

This will also give you time to pay off any consumer debt, save an emergency fund, and start saving for a new property. You can also use the time to learn everything you can about your target market using websites like Zillow.

Jeremy H. · Answer

I don't see tariffs effecting a BRRRR model that much as long as you run conservative numbers (which you should be doing anyway)

Small rehabs is minimal materials and labor - sure it may be 10-20% more expensive - a 20k rehab may cost you an extra 3k (15%). That 3k is not going to make or break you.

A new build on a 500k house would cost you an additional 75k (if we keep the % the same) - big difference in actual dollars.

The interest rate is something you need to consider. I'd personally run it at 9% for a conventional loan. Also minimize your time holding the property (vacancy is a killer). Buy conventional if you can and put the rehab on a 401k loan, 0% credit cards or something like that.

If you can't legally steal it - don't buy it. You make your money when you buy.

I'm personally taking a break from RE for the time being - the stock market is on sale so that's where my extra cash is going. In two years I think we'll be up easily 20% from today, if not more. RE is not going to beat that in the short term. I'll take some of that cash out and diversify into RE later down the road.

Ko Kashiwagi · Answer

Hi DaNeale,

Planning out a timeline like this is a great idea! On top of educating, it would be very important to start networking and nurture relationships! A lot of things you can learn from online but also people!

DaNeale Canidy · Answer

Thank you so much for your response. I certainly plan to take time to learn as much as I can with all of the great resources. There is so much information that at times it can feel like drinking from a firehose. But I’m committed to the process and I’m most excited about using the BP calculators to analyze deals because I’m a numbers person by trade.

DaNeale Canidy · Answer

That’s excellent insight. Small rehabs vs complete gut jobs makes more sense both from a financial standpoint and a practical standpoint as a beginner.

You also make a great point about redirecting your extra cash. I would do the same if I had a solid real estate portfolio. My only property is my primary residence which is cash flowing zero. My focus right now is diversification since all of my investments are in the stock market. My monthly 401k contributions and company match are still going into the stock market but this latest dip is motivation for me to build wealth through other investments as well.

DaNeale Canidy · Answer

Thank you for your reply! From listening to the podcast I’m learning that your network can make all the difference in the success of your business. I’m definitely planning to build my network before diving into my first purchase.

DaNeale Canidy · Answer

Thank you so much for your reply. That is really helpful. It’s easy to get captivated by the stories of people building up their portfolios rather quickly using BRRRR but in this environment it could be a longer process if I’m leaving some money in each deal and relying on additional W-2 income to help finance the next deal. I’m actually more comfortable with a slower process as I know the learning curve will be steep to begin with.

John O'Leary · Answer

@DaNeale Canidy

If you're considering the BRRRR strategy, especially in today’s market, the first step is to connect with a lender who can walk you through the exact DSCR numbers for the type of property you're targeting. That’ll help you understand what kind of refinance terms you'd realistically qualify for based on projected rents and expenses. In high interest rate environments, most BRRRR investors aren’t able to pull all their cash back out like they could a few years ago. Many are only recouping a portion of it, and quite a few are having to go with rate-and-term refinances instead of cash-out refis which can slow down portfolio growth. In markets like Florida, where values and insurance costs are shifting quickly, a lot of investors are having to rethink their assembly line and exit strategy.

Dan H. · Answer

Why would the rates have anything to do with whether you extract all your cash unless you are referring to lower LTV necessary to get positive cash flow.  This amount to buying cash flows and the underwriting shows buying cash flow provides a poor return.

I can still find purchases that project a full investment extract.  My issue is that if I refi at high LTV after rehab (so top of market valuations), I bleed cash in my market.  This negative cash flow reduces the initial return from the value add.   Enough months of negative cash flow can consume all of value added via the rehab.

Good luck

Should I rethink using BRRRR as my entrance strategy given the tariff environment?

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