Will BRRRR still work if interest rate keeps increasing?

[Jason Chen]

I love the BRRRR strategy and want to implement that towards my next deal. However, with the interest rate keeps raising, is the BRRRR strategy still going to be effective? Wouldn’t you run into the situation that you will no longer have a positive cash flow after you refinance with a higher rate that causes a higher monthly payment?

[John Acheson]

Jason, that is a great Q as it looks like the Fed will hike rates three times just in 2018. The real Q is the gap between appreciation in your target market and lending rates increasing or decreasing and by how much. If there's inflation all prices rise so in theory rents should rise, expenses should rise and of course your refi will rise.

I've been searching high and low for strategies to deploy when appreciate slows or becomes depreciation, and there's not much out for the real estate. In stocks etc. you can simply short or use options to hedge your investments.

How do you short real estate? That means sell it now and buy it back later.

The best answer so far is that rents should hold firmer than values during a downturn so BRRRR might become rent and hold WITHOUT refi. Then the 1st mortgage's interest rates become paramount and should be locked in with the lowest fixed rate via the best possible DTI in combination with the highest possible credit score/s and lowest debt.

A business entity with credit like a LLC is one strategy to move credit around and eliminate personal debt.