Limitations on future financing using BRRRR

[Aaron Tiffany]

Hi all, I'm new to BP and have been assertively listening to podcasts and reading BP sponsored books over the last couple of months. I feel I have a good understanding of the BRRRR strategy, how it works, and the short/long-term benefits. However, I recently threw the idea by a friend of mine whose opinion I trust a great deal in financial matters broadly, and real estate specifically. While not shooting the idea down, he raised a number of possible concerns about future financing, such as possibly needing additional collateral or proof of other sources of income to justify repeated loans. He also raised concerns about possible increases in the interest rates on subsequent loans.

Ultimately, I'd like to understand the bank/lender's perspective when someone comes to them with multiple mortgages on the books and keeps trying to throw new refinanced properties onto the books. What do lenders/banks think when they see this strategy being employed? Is it viewed as more risky and do ensuing interest rates rise as the number of properties and refinanced loans increases? If I'm employing capital in a repeated BRRRR strategy on less expensive properties (say 80-200K all in costs), what impact would this have if I decide to borrow a conventional loan to buy a larger property for myself in 5 to 10 years? My understanding is that most banks like to see two years of the asset performing as a rental before they see it as an asset and not merely as a (good) debt/liability?

Also, when most people do BRRRR calculations, do you also taking into account opportunity costs of how your capital (especially if cash assets) could be alternately invested?

Thanks for tolerating a newbie question that may have been discussed elsewhere.

-Aaron