BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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The BRRRR method is dead
I believe the BRRR method is dead or at best on life support! The last decade has been easy for investors to use the BRRR method, but now we need to learn other methods. I've been learning these other methods for over a decade because I went through the last recession when banks stopped lending.
Why I believe the BRRR method isn't going to work in the next seasons of investing:
1. Bank rates have gone up which won't allow most properties to cashflow
2. Banks have tightened their lending requirements which aren't allowing most people to qualify.
3. Appreciation has slowed and even flattened in markets which means there isn't free money any more.
What other reasons do you think the BRRR method is in the past?
#3 Off Topic Contributor
- Attorney
- Viera, FL
Quote from @Henry Lazerow:
Real estate should at a minimum get you 6% Cashflow + 8% appreciation and 2-3% in mortgage paydown all based off a 25% down payment.
You can do that or better on dividends and not have tenants. The only advantage on real estate in this scenario is depreciation.
Wow, I commented a month ago that the people making money off of BRRRR was the preachers, not the doers of the BRRRR. This thread is proving me right. It's all the real estate agents, brokers and other vendors servicing landlords talking about how great it is. Not much from owners who built up a portfolio of 20-50+ units using this. Pay attention. Their money is made on you continuing to transact in real estate, not you maximizing your own profit.
Quote from @Henry Lazerow:
Putting money in a CD making 5% but with 3-4% inflation is only a real return of 1-2%. Real estate should at a minimum get you 6% Cashflow + 8% appreciation and 2-3% in mortgage paydown all based off a 25% down payment.
Yes sir, those are all benefits not always talked about in the real estate investing world! Some people will argue we have much higher inflation which means our 5% savings are actually losing money to inflation!
Quote from @Timothy W.:
Quote from @Henry Lazerow:
Real estate should at a minimum get you 6% Cashflow + 8% appreciation and 2-3% in mortgage paydown all based off a 25% down payment.
You can do that or better on dividends and not have tenants. The only advantage on real estate in this scenario is depreciation.
Wow, I commented a month ago that the people making money off of BRRRR was the preachers, not the doers of the BRRRR. This thread is proving me right. It's all the real estate agents, brokers and other vendors servicing landlords talking about how great it is. Not much from owners who built up a portfolio of 20-50+ units using this. Pay attention. Their money is made on you continuing to transact in real estate, not you maximizing your own profit.
Great observation!
Buying a property, fixing it up, and refinancing at the higher value will never stop. This has been going on for a 100 years lol. @Adrian Smude
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Quote from @Matthew Crivelli:
Buying a property, fixing it up, and refinancing at the higher value will never stop. This has been going on for a 100 years lol. @Adrian Smude
I didn't mean it'll completely stop, but the fact of it being a business plan I believe it's season is over. It'll come back but those that don't know anything but BRRR are in for a struggle.
#3 Off Topic Contributor
- Attorney
- Viera, FL
Quote from @Adrian Smude:
Quote from @Timothy W.:
Quote from @Henry Lazerow:
Real estate should at a minimum get you 6% Cashflow + 8% appreciation and 2-3% in mortgage paydown all based off a 25% down payment.
You can do that or better on dividends and not have tenants. The only advantage on real estate in this scenario is depreciation.
Wow, I commented a month ago that the people making money off of BRRRR was the preachers, not the doers of the BRRRR. This thread is proving me right. It's all the real estate agents, brokers and other vendors servicing landlords talking about how great it is. Not much from owners who built up a portfolio of 20-50+ units using this. Pay attention. Their money is made on you continuing to transact in real estate, not you maximizing your own profit.
Great observation!
Thanks. Saw you're a mobile home landlord. VERY very smart down here. I've been in the insurance claims business for 20 years and not everyone gets that a modern mobile home tends to weather a hurricane better than most framed homes.
I get that this is probably a post to engage in conversations.... but I will play this game. Its only dead if you are looking in the wrong markets. I am not sure what you talking about. I can cashflow great at an 8% loan, banks are still lending..... you just need the right bank. And appreciation has NOT slowed down and flattened all markets.
You are being very broad- each market is it's own market- and you can't categorize this broadly. For example We know historically areas like Memphis, Birm, Little Rock only appreciate 3-4% a year but areas like SW FL are about 8-10%. In the last few years they grew much higher, but you need to look at the historical numbers not the last few years. Did you know that Atlanta was one of the first markets to crash in 2009? And the smaller areas in the south didn't take a dive for a few years later?
You can't assume all markets are the same. Plenty of opportunity out there- you just have to know what you are looking for and what strategies/expectations are set.
Quote from @Timothy W.:
Quote from @Adrian Smude:
Quote from @Timothy W.:
Quote from @Henry Lazerow:
Real estate should at a minimum get you 6% Cashflow + 8% appreciation and 2-3% in mortgage paydown all based off a 25% down payment.
You can do that or better on dividends and not have tenants. The only advantage on real estate in this scenario is depreciation.
Wow, I commented a month ago that the people making money off of BRRRR was the preachers, not the doers of the BRRRR. This thread is proving me right. It's all the real estate agents, brokers and other vendors servicing landlords talking about how great it is. Not much from owners who built up a portfolio of 20-50+ units using this. Pay attention. Their money is made on you continuing to transact in real estate, not you maximizing your own profit.
Great observation!
Thanks. Saw you're a mobile home landlord. VERY very smart down here. I've been in the insurance claims business for 20 years and not everyone gets that a modern mobile home tends to weather a hurricane better than most framed homes.
Yes sir! As I was once told when I was scared of mobile homes… there are 1965s still around… they’ve been through more hurricanes than you have! :-)
Quote from @Melissa Nash:
I get that this is probably a post to engage in conversations.... but I will play this game. Its only dead if you are looking in the wrong markets. I am not sure what you talking about. I can cashflow great at an 8% loan, banks are still lending..... you just need the right bank. And appreciation has NOT slowed down and flattened all markets.
You are being very broad- each market is it's own market- and you can't categorize this broadly. For example We know historically areas like Memphis, Birm, Little Rock only appreciate 3-4% a year but areas like SW FL are about 8-10%. In the last few years they grew much higher, but you need to look at the historical numbers not the last few years. Did you know that Atlanta was one of the first markets to crash in 2009? And the smaller areas in the south didn't take a dive for a few years later?
You can't assume all markets are the same. Plenty of opportunity out there- you just have to know what you are looking for and what strategies/expectations are set.
You are correct, I worded this to generate responses because I wanted to know people’s views. Thanks for playing along and giving your input!
I agree with your statement!
to keep in the general conversation though I do think relaying on fast growth with a BRRR strategy like people have been able to over the last decade is on life support. There is always an exception tot he rule. But I feel those that don't learn other strategies will be left behind in this new market just like they were in the last major shift in the market. :-)
Quote from @John Morgan:
@Adrian Smude
You're 100% right. The BRRRR method doesn't work in most markets anymore like it did in 2017. However, people want to sell books about it and gurus claim it still works in today's environment. Lol. I've found other ways to cash flow like pivoting to renting by the room or sec 8. The days of cash out refis to scale up and make a killing are gone. I've bought 12 rentals from cash out refis by pulling equity out to scale up. But it doesn't make sense anymore with current interest rates. Today's environment will "thin out the herd." Many investors will go away until the numbers work. And many noobs who want to hit a home run right away without "planting that tree" and willing to wait several years will get a hard lesson on the reality of what we're dealing with. I'm ok planting some trees in todays environment and waiting a decade for it to produce. But the impatient ones that need to make a ton of money off their investment quickly will be disappointed.
I really appreciate this take. I haven't been able to find cash flow to save my life. And not for lack of grinding looking every day. So today I put offers on two duplexes that I think are a "base hit." Long term play, what some are calling BEAF: Break Even, Appreciation Focus. I like your planting trees metaphor - it comforts me. When all around me - podcasts, books, etc - I'm hearing "cash flow cash flow", and I'm over here looking for assets that will hopefully appreciate and cash flow in year 3 or 5.
#3 Off Topic Contributor
- Attorney
- Viera, FL
I really appreciate this take. I haven't been able to find cash flow to save my life. And not for lack of grinding looking every day. So today I put offers on two duplexes that I think are a "base hit." Long term play, what some are calling BEAF: Break Even, Appreciation Focus. I like your planting trees metaphor - it comforts me. When all around me - podcasts, books, etc - I'm hearing "cash flow cash flow", and I'm over here looking for assets that will hopefully appreciate and cash flow in year 3 or 5.
Don't sweat it. Back around 2008 I was mocked mercilessly on here for finding cashflow, lol. I was picking up SFRs in South Bend, Indiana for between 5k and 12k each and renting them out for around $500 a month. I was called everything from a scam artist to a slumlord to an idiot. More than half of the advice on here is driven by an agenda so you have to hear it but not necessarily listen to it.
Quote from @Timothy W.:
Quote from @Henry Lazerow:
Real estate should at a minimum get you 6% Cashflow + 8% appreciation and 2-3% in mortgage paydown all based off a 25% down payment.
You can do that or better on dividends and not have tenants. The only advantage on real estate in this scenario is depreciation.
Wow, I commented a month ago that the people making money off of BRRRR was the preachers, not the doers of the BRRRR. This thread is proving me right. It's all the real estate agents, brokers and other vendors servicing landlords talking about how great it is. Not much from owners who built up a portfolio of 20-50+ units using this. Pay attention. Their money is made on you continuing to transact in real estate, not you maximizing your own profit.
I have. However, I have not purchased since Dec 2021 (purchased $4m that month). This is because I find the hold after the refinance in my market has negative cash flow so the properties that were previously good BRRRR candidates are now better flips than BRRRR (assuming you do not want your profit to decline each month after the refinance).
*The Fully Cash-out BRRRRR is dead. The BRRRRR is not dead and value add investing will always make sense when one looks at alternatives.
Quote from @Adrian Smude:
I believe the BRRR method is dead or at best on life support! The last decade has been easy for investors to use the BRRR method, but now we need to learn other methods. I've been learning these other methods for over a decade because I went through the last recession when banks stopped lending.
Why I believe the BRRR method isn't going to work in the next seasons of investing:
1. Bank rates have gone up which won't allow most properties to cashflow
2. Banks have tightened their lending requirements which aren't allowing most people to qualify.
3. Appreciation has slowed and even flattened in markets which means there isn't free money any more.
What other reasons do you think the BRRR method is in the past?
You need to get better deals. I just got, about 20 all will be about 80k all in, All with have values of about 115- 120k, All will have about 15% or better net caps, Its all about you network and knowledge.
All the best
Quote from @Tyler Lingle:
*The Fully Cash-out BRRRRR is dead. The BRRRRR is not dead and value add investing will always make sense when one looks at alternatives.
Quote from @Bob Stevens:
Quote from @Adrian Smude:
I believe the BRRR method is dead or at best on life support! The last decade has been easy for investors to use the BRRR method, but now we need to learn other methods. I've been learning these other methods for over a decade because I went through the last recession when banks stopped lending.
Why I believe the BRRR method isn't going to work in the next seasons of investing:
1. Bank rates have gone up which won't allow most properties to cashflow
2. Banks have tightened their lending requirements which aren't allowing most people to qualify.
3. Appreciation has slowed and even flattened in markets which means there isn't free money any more.
What other reasons do you think the BRRR method is in the past?
You need to get better deals. I just got, about 20 all will be about 80k all in, All with have values of about 115- 120k, All will have about 15% or better net caps, Its all about you network and knowledge.
All the best
Congrats & I agree! I’m not a BRRRR guy, but I see a lot of struggling investors these days that are a one trick pony. :-)
Quote from @Adrian Smude:
Quote from @Bob Stevens:
Quote from @Adrian Smude:
I believe the BRRR method is dead or at best on life support! The last decade has been easy for investors to use the BRRR method, but now we need to learn other methods. I've been learning these other methods for over a decade because I went through the last recession when banks stopped lending.
Why I believe the BRRR method isn't going to work in the next seasons of investing:
1. Bank rates have gone up which won't allow most properties to cashflow
2. Banks have tightened their lending requirements which aren't allowing most people to qualify.
3. Appreciation has slowed and even flattened in markets which means there isn't free money any more.
What other reasons do you think the BRRR method is in the past?
You need to get better deals. I just got, about 20 all will be about 80k all in, All with have values of about 115- 120k, All will have about 15% or better net caps, Its all about you network and knowledge.
All the best
Congrats & I agree! I’m not a BRRRR guy, but I see a lot of struggling investors these days that are a one trick pony. :-)
Once " I got out of my own way" that's when I went to the next level. It's a very simple, NOT easy business. Buy right, fix right, sell/ rent right, everyone spends so much time making it more complicated.
A significant challenge with the BRRRR method is the rising rates and extended seasoning periods for cash-outs. For instance, DSCR loan interest rates are determined by LTV and credit score, functioning much like coordinates on a graph (think X any Y axis). If you aren't securing properties at a substantial discount, you may end up maximizing the LTV, resulting in higher interest rates. This can negatively impact cash flow and DSCR ratios.
To navigate this, we're advising clients to integrate a few fix-and-flips into their strategy. This approach enables investors to continue purchasing rental properties without needing a cash-out post-rehab. Proceeds from the flips aid continuous buying, and when refinancing, a lower LTV results in favorable interest rates, optimizing cash flow. While BRRRR remains viable, its feasibility has decreased in certain markets, such as Central Florida.
I'm listening to the BRRRR book now and although I can't apply directly what many of the ideas are concluding there are a few examples like Mike vs Tom scenario where Mike's career skills transferred to other creative ways of connecting with potential clients. I don't think it's about copying and pasting the information, yet using it to come up with solutions on your own. I felt the same way with Rich Dad Poor Dad. Some would say there are no detailed explanations on how to "pay your self first", I know I didn't find any, but listening to that part over again, I came up with my own solutions to get the start in the game.
I close a brrr cash out next week at 7.1% and it cashflows but its a D class property. Most of my investor clients focus on total return and buy in good areas where cashflow goes up to maybe brrr in a few years. This will be my 2nd brrr and I have a 3rd also in progress so still alive. The 3rd one is a heavy rehab though six figure budget and i got really cheap.
Quote from @Anthony King:
@Adrian Smude I just bought a SFH for 20k, put 38k into it, got a renter in for $900/month and it appraised for 105k. I'm doing a cash out refi at 8.25% and getting 23k cash out. It breaks even, I have $0 in the deal and I have 23k cash out. Another SFH I am in the middle of refi...purchased for 57k, put 20k into it, appraised for 120k, rented for $1,250, 8.25% rate, breaks even and pulling 13k out. Another one in the middle of rehab right now...
Seems to be working for me.