Jessica Davis Holland, an Austin, Texas real-estate investor, and her husband recently spent $225,000 on a three-bedroom, two-bathroom home in the growing suburb of Cedar Creek.
Except, this time, the numbers didn't work out as Holland had originally planned. In addition to the purchase price, they spent roughly $65,000 on the renovations, $5,000 on property taxes, and another $22,500 on carrying the property — including closing costs and monthly mortgage payments — for a few months while the renovations wrapped.
Home rehabbers like Holland are quickly finding that the once-reliable method known as"BRRRR" — short for buy, rehab, rent, refinance, and repeat — has become much riskier as home prices in hot pandemic markets fizzle out and 30-year mortgage rates reach the 7% threshold. Not only are homes selling and appraising for less than they were six months ago, which dampens the size of cash-out refinances, but lenders have become more risk-averse.
When the BRRRR numbers don't work, Holland said, there are a few strategies investors could consider instead.
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