When interest rates rise does the BRRR Strategy still make sense?

The BRRR (Buy, Rehab, Rent, Refinance) strategy can still make sense even when interest rates rise, but it's important to consider how the higher rates may impact the overall feasibility and profitability of the strategy. Here are a few points to keep in mind:

Purchase and renovation costs: With higher interest rates, borrowing costs increase, which can affect your ability to finance the initial purchase and renovation expenses. It's crucial to carefully evaluate the numbers and ensure that the potential rental income and property appreciation justify the higher costs associated with the strategy.

Cash flow and rental income: The BRRR strategy relies on generating rental income to cover expenses and potentially generate positive cash flow. When interest rates rise, it may affect the affordability for potential tenants, potentially impacting your ability to secure reliable rental income. It's important to consider the local rental market conditions and assess the demand and rental rates to ensure the property can generate sufficient cash flow.

Refinancing and loan terms: The "R" in BRRR stands for "Refinance," which involves obtaining a new loan with improved terms after the property has been renovated and stabilized. Higher interest rates can affect the terms and availability of refinancing options. It's crucial to analyze the prevailing interest rates, loan terms, and potential impact on your monthly mortgage payments to ensure the refinancing step remains financially viable.

Property appreciation: The BRRR strategy also relies on the property's appreciation over time, which can offset the higher borrowing costs associated with rising interest rates. It's important to assess the local real estate market and historical trends to determine the potential for property value appreciation.

Exit strategy: As with any real estate investment strategy, having a well-defined exit strategy is crucial. Higher interest rates can affect buyer demand, which may impact your ability to sell the property and realize your profits. It's important to factor in potential market conditions and the impact of interest rates when planning your exit strategy.

In summary, while rising interest rates can impact the feasibility and profitability of the BRRR strategy, it doesn't necessarily make it obsolete. It's essential to carefully evaluate the numbers, consider market conditions, and adapt your strategy to account for the changing interest rate environment.