With median home prices over $430,000 and interest rates hovering around 6%, the concept of BRRRRing your way to financial freedom seems like a real estate strategy from a bygone era.
The BRRRR strategy (buy, rehab, rent, refinance, repeat) is based on finding discounted properties, fixing them up, renting them out, refinancing, and socking away the cash flow with a long-term tenant, and repeating the process until you have amassed a sizable monthly cash flow. In 2024, I largely believe that it’s unrealistic to achieve.
Assuming you can find a discounted home, fix it up using hard money, and get market rent, the issue comes when you have to refinance it, strip the home of its equity, and take on more debt to repeat the process. Now, you are on the hook for the extra loan.
How much cash flow are you really making? Assuming you want to follow the 1% rule, you would have to charge your tenants over $4,000/month in rent if you purchased your rental below the median market value, adding debt to bring it to the median price when you rehabbed and refinanced. This is not feasible in most markets because the average national U.S. rent is $1,840.
Low-Cash-Flowing Properties Are Not Worth It
For argument’s sake, let’s assume you have found an investment that meets all the BRRRR criteria and cash flows $300/month after all expenses. It’s time to break the fallacy that you can BRRRR your way to financial freedom by amassing $300 cash-flowing rentals.
First, in the current market, to find a property that cash flows by $300 and does not cost a fortune, you would have to be in a C or C+ neighborhood—or worse. Having owned many such properties and clocked in more landlord/tenant court hours than some judges, I can attest that the numbers on paper never work out. Repairs and nonpayment of rent/evictions wipe out any perceived cash flow and leave most landlords deeply in the red. Even if you have scaled a few properties generating…