Dangers of Long-Term BRRRR

[Rob Barry]

As I’ve been growing my portfolio of SFRs, a thought dawned on me. A lot of BRRRR investors who got started over the last decade or so are probably cashflowing less than $200 per door and are leveraged to the hilt to keep growing that cashflow a few hundred bucks at a time. I love buying foreclosures and getting them to like-new because you eliminate major maintenance for a while. But what happens when those 10, 50 or 80 doors you gobbled up start to need new rooves, HVACs and boilers? When the age starts to show and suddenly the capex starts creeping up? With most of the revenue going to debt service, growing really big really fast with 75% leverage seems to leave open lots of downside. I could see deferred maintenance spiraling out of control quickly. Are most of you BRRRR investors taking this into account in your long term strategy? I’m probably looking to curtail this by trying to maintain an average 10-year hold and making sure I do ALL deferred maintnanance going in, and put in hard-wearing materials. I also plan to make sure I don’t exceed 60% leverage in total.