Flaw in BRRR Strategy

[Henry Hawkins]

Maybe not as much of a flaw as it is a concern. I'm trying to wrap my head around this strategy, which makes sense for the most part.

Refinancing a property is a smart way to squeeze the most out of your dollar and investment. However, what happens after you refinance and put all that money into property #2? Property #1 is now owed back the full mortgage that was just taken out to buy property #2. Now, repeating this, and refinancing property #2 to buy #3, doesn't make sense to me. Yes, you own 3 properties, but only 1 of them is fully paid off. What happens in a economy like we have now where houses #1 and #2 don't pay rent and you can't evict them. Or, what if there was a crash and the properties lost 30% of their value and you are paying them for an additional 5-10 years.

I feel like this puts you at a significant amount of risk, and carrying that much debt once you have acquired 5 or more properties makes me uncomfortable. I'm new to investing in real estate, and using debt to your advantage, so maybe I just need to be more comfortable with debt. But, I'm always one to be prepared for the worst cause **** happens.

Hoping someone can help make sense of this to me, maybe I am missing something also.

Peace.