Welcome to the June edition of the Investor Newsletter! As summer heats up the housing industry remains cool in many markets. And while it isn’t moving fast, it *is* moving. Steady rents and tight inventory are shaping a landscape where patience pays. In this issue, we’re breaking down the signals that matter and the risks worth watching. So, go grab a cold drink and let’s dive in!
The BRRR Method in 2025: Not Dead, But Deeply Distressed
The BRRR method (Buy, Rehab, Rent, Refinance, Repeat) used to be a reliable way to grow a portfolio using sweat equity and smart debt. And for much of the past decade, it’s worked. Rates were low, prices were rising, and refinance dollars came easy. However, in 2025, the setup has changed. The math behind BRRR is breaking down, and for many investors, the model no longer holds.
The biggest issues are (1) finding quality deals and (2) refinancing and pulling invested capital out to (R)epeat the BRRR process. With 30-year mortgage rates hovering around 7% and investor loan terms often even higher, some investors are seeing the refinance process compress cashflow and not free up enough capital to move onto the next deal, thereby hurting the third “R” - Repeat. Many lenders have tightened LTV caps and raised DSCR thresholds, further exacerbating this problem. To avoid these challenges, please connect with our friends with LendingOne to help. They’ve actually lowered their DSCR threshold and have industry leading terms to help you invest more. Connect with them through the "Rate Update" section below!
Adding to the challenges, rehab costs continue to show headwinds. Material prices remain elevated, and skilled labor is still scarce. Even when renovations stay on budget, post-rehab valuations aren't rising fast enough to justify the effort. According to the Case-Shiller Index, annual home price growth slowed to 3.4% in March 2025, down from 3.9% the previous month - when adjusting for inflation, growth looks closer to 0.4%, further proving the challenge.
Still, BRRR hasn’t disappeared entirely. Many investors are still able to Fix & Flip by watching permit trends and honing in on areas (often smaller communities) where home prices are modest and rental demand is consistent. As resale price appreciation continues to flatten, or even drop in certain communities - savvy investors will still be able to find deals that meet desired returns. Please contact us to discuss value-add communities in your desired areas!
