Does BRRRR Still Work When Interest Rates Are High?
The short answer: The classic BRRRR strategy is largely broken in today’s high-interest-rate environment—but a modified version can still work.
The traditional appeal of BRRRR (Buy, Rehab, Rent, Refinance, Repeat) was simple: buy a property, improve it, rent it out, then refinance and pull most—or ideally all—of your invested cash back out to fund the next deal.
The problem is that today’s interest rates make that final step much more expensive.
The High-Rate Refinance Trap
Consider a typical BRRRR deal:
| Phase | Figures | Strategy Context |
|---|---|---|
| Buy + Rehab | $250,000 total investment | $200,000 purchase + $50,000 rehab |
| After Repair Value (ARV) | $325,000 | $75,000 in forced equity |
| 75% LTV Refinance | $243,750 new loan | Leaves roughly $6,250 of your original investment trapped—before closing costs |
At first glance, that doesn’t look terrible. You created $75,000 in equity and recovered most of your capital.
But here’s the catch: you’ve also created a $243,750 mortgage.
At a 7%+ interest rate, the debt service can quickly eat into the property’s cash flow. Once you add property taxes, insurance, maintenance, vacancy, capital expenditures, and possibly property management, the rent required to produce a comfortable return can become unrealistic.
And that’s the part of BRRRR that often gets overlooked: getting your money back out isn’t the same thing as having a good investment.
The Modern Pivot: Buy → Rehab → Rent → Hold → Repeat
Rather than forcing the refinance simply to recover your capital, a more conservative approach is to modify the strategy:
1. Buy well below market value.
In a slower market, focus less on appreciation and more on buying right. A good deal should make sense based on today’s numbers—not on the assumption that prices will continue rising.
2. Prioritize cash flow over leverage.
The goal isn’t necessarily to get every dollar back out of the property. Sometimes leaving more equity in the deal produces a much healthier property with lower monthly debt service.
3. Hold and wait.
If the property performs well, there is no reason to refinance simply because you can. Keep the lower debt burden and let the property generate cash flow. If rates eventually fall, you can always revisit the refinance.
The Bottom Line
The original BRRRR model was built around capital velocity: recover your investment, redeploy it, and keep repeating the process.
In a high-rate environment, that can become a dangerous game. You may succeed at getting your cash back out only to replace it with expensive debt that weakens the investment.
A modified strategy—Buy, Rehab, Rent, Hold, Repeat—may be slower, but it can be considerably more resilient.
You don’t have to maximize leverage to build a successful rental portfolio. Sometimes the smartest move is to leave your money in a good property, keep the debt manageable, and let time do the heavy lifting.
