The BRRRR Trap — 7 Costly Mistakes New Investors Make and How to Avoid Them

The BRRRR method—Buy, Rehab, Rent, Refinance, Repeat—is one of the most powerful strategies for building a real estate portfolio without constantly injecting new capital. But it’s not foolproof. For first-time investors, a few wrong moves can derail the entire cycle—leading to missed refinance windows, disappointing returns, or deals that flat-out don’t work.

Here are seven traps that trip up new BRRRR investors—and how to stay clear of them.

1. Overconfidence in Property Value

It’s easy to get carried away with optimistic comps and high ARV projections. But lenders—and appraisers—won’t share your enthusiasm if the data doesn’t back it up. Always base your numbers on conservative, well-matched comparables. That means similar size, condition, and age—not the shiny flip three streets over with an extra bedroom and a pool.

2. Loose Rehab Planning

Renovation budgets tend to expand in real time—especially when surprises crop up mid-project. A rushed walk-through or vague contractor estimate can leave you scrambling for cash. Lock in detailed bids before closing and build in at least a 10–15% buffer for the unexpected. Walking the property with a qualified inspector upfront can also save you a world of regret.

3. Sloppy Tenant Placement

Trying to fill a unit fast just to show rental income for refinancing is a classic rookie move. A bad tenant isn’t just a short-term headache—they can kill your refinance or wreck your long-term cash flow. Take the time to properly screen every applicant. Solid tenants make for smoother financing and fewer midnight repair calls.

4. Refinance Timing Gone Wrong

Some investors assume they can refinance the moment the rehab is done. Not so. Many lenders impose a seasoning period—often 6 to 12 months—before allowing a cash-out based on the new appraised value. That delay can leave you stuck in costly bridge financing. Know your lender’s rules before you buy and align your timeline accordingly.

5. Underestimating Holding Costs

While your property sits empty—during renovation, while waiting for tenants, or stuck in the refinance process—the meter keeps running. Loan interest, insurance, property taxes, and utilities all eat into your returns. Budget for a few extra months of holding costs right from the start so you’re not caught off guard.

6. Poor Appraisal Preparation

You might have put $50,000 into the renovation, but if that value isn’t obvious to the appraiser, it might not count. Clean, stage, and document everything. A well-presented property and a one-pager highlighting improvements (with before-and-after photos) can help ensure the appraised value reflects the actual upgrades.

7. Stretching the Recycle Too Far

It’s tempting to pull every dollar of equity out of each deal to fund the next one. But if market conditions shift—interest rates rise, rents soften, or vacancies increase—you could be overexposed. Leave some equity in the property if the numbers are tight. Long-term success in BRRRR comes from durability, not just speed.

Final Thought

The BRRRR strategy works—but only when each piece is executed with care. Play the long game. Use conservative numbers, build in buffers, and don’t cut corners with tenants or lenders. Recycling capital is great—but protecting it is how you stay in the game.