5 Common BRRRR Mistakes and How to Avoid Them

The BRRRR method—Buy, Rehab, Rent, Refinance, Repeat—is a powerful strategy for building wealth in real estate. However, as with any investment strategy, mistakes can happen, and they can be costly. Whether you’re new to the BRRRR process or a seasoned investor, understanding common pitfalls and how to avoid them can save you time, money, and stress.

Here are the five most common BRRRR mistakes and actionable tips to help you steer clear of them.

1. Overpaying for the Property

One of the biggest mistakes investors make is overpaying during the Buy phase. The success of your BRRRR project hinges on acquiring the property at a price low enough to leave room for profitable renovations, refinancing, and long-term rental income. Overpaying can eat into your margins and leave you struggling to recoup your investment.

How to Avoid It:

• Run the Numbers: Use the 70% rule to determine your maximum offer. This rule states that your purchase price plus rehab costs should not exceed 70% of the property’s after-repair value (ARV).

• Research the Market: Analyze comparable sales (comps) in the area to understand what similar properties are worth.

• Be Patient: Don’t rush into a deal out of fear of missing out. Wait for the right property that meets your financial criteria.

  
  

Pro Tip: If the deal doesn’t work on paper, it won’t work in reality. Stick to your numbers.

2. Underestimating Rehab Costs

Renovation expenses often spiral out of control, especially if you fail to account for hidden issues like plumbing, electrical work, or structural repairs. Underestimating rehab costs can throw off your entire BRRRR strategy, leaving you with unexpected expenses that reduce your profitability.

How to Avoid It:

• Conduct a Thorough Inspection: Before purchasing, hire a qualified inspector to assess the property and identify potential repair needs.

• Get Detailed Contractor Bids: Work with experienced contractors to get accurate, itemized estimates for labor and materials.

• Include a Contingency Fund: Budget an additional 10–20% for unforeseen costs to avoid financial surprises.

  
  

Pro Tip: Focus on high-ROI improvements like kitchens, bathrooms, and curb appeal, and avoid over-renovating beyond the neighborhood standard.

3. Failing to Screen Tenants Properly

In the Rent phase, some investors rush to find tenants, only to end up with renters who damage the property or fail to pay rent. Poor tenant screening can result in lost income, costly repairs, and unnecessary stress.

How to Avoid It:

• Conduct Background Checks: Verify potential tenants’ rental history, credit score, and employment status.

• Set Clear Criteria: Establish non-negotiable standards for tenant qualifications, such as income-to-rent ratios or no prior evictions.

• Use a Lease Agreement: Protect your investment by creating a detailed lease agreement outlining tenant responsibilities and terms.

  
  

Pro Tip: Consider hiring a property management company to handle tenant screening, lease agreements, and ongoing management if you prefer a hands-off approach.

4. Refinancing Too Soon or Too Late

Timing your refinance is crucial to recovering your initial investment and moving on to the next property. Refinancing too soon can result in a lower appraisal, while waiting too long can increase your holding costs and delay your ability to reinvest.

How to Avoid It:

• Wait for Tenant Stability: Lenders typically prefer to see a few months of steady rental income before approving a refinance.

• Optimize Your Appraisal: Ensure the property is in top condition and provide documentation of your renovations and rental income to support a higher valuation.

• Understand Loan Terms: Work with a lender experienced in BRRRR projects to determine the ideal timing for your refinance.

  
  

Pro Tip: Track your holding costs carefully and aim to refinance within 6–12 months of completing renovations to maintain momentum.

5. Scaling Too Quickly

The Repeat phase of BRRRR is where investors scale their portfolio, but growing too quickly can lead to cash flow problems, poor deal choices, and burnout. It’s easy to overextend yourself by taking on multiple projects without the financial or operational capacity to manage them.

How to Avoid It:

• Build a Strong Foundation: Perfect your process with one or two properties before scaling up.

• Monitor Cash Flow: Ensure you have enough reserves to cover unexpected expenses, vacancies, and carrying costs for each property.

• Leverage a Team: Work with trusted contractors, property managers, and lenders to streamline your operations and avoid becoming overwhelmed.

  
  

Pro Tip: Quality over quantity—focus on maximizing profitability with each property before expanding your portfolio.

Bonus Tip: Learn from Every Project

Mistakes are inevitable, even for experienced investors. The key is to treat each BRRRR project as a learning opportunity. Analyze your successes and failures, adjust your approach, and refine your strategy with each new property.

Conclusion: Avoiding Mistakes, Maximizing Success

The BRRRR method is a powerful strategy for building wealth through real estate, but it requires careful planning and execution. By avoiding these common mistakes—overpaying, underestimating rehab costs, failing to screen tenants, mistiming your refinance, and scaling too quickly—you can set yourself up for success and grow your portfolio with confidence.

At Lending Path Advisors, we specialize in financing solutions tailored to BRRRR investors. Whether you need funding for your first property or want to scale your portfolio, our team is here to help you navigate every phase of the BRRRR process.

Ready to take the next step? Contact us today and let’s build your BRRRR success together.