BRRRR Strategy Returns Narrow as Rehab Loans Hit 10%

Returns for real estate investors pursuing the buy-rehab-rent-refinance-repeat strategy, commonly known as BRRRR, have compressed in 2026 as private rehab loan rates climbed above 10%. The average rate on fix-and-flip loans reached 10.4% in March, up from 9.1% a year earlier, according to a survey of 45 private lenders conducted by the American Association of Private Lenders.

BiggerPockets reported that its investor sentiment index for BRRRR fell to 54 in March from 71 the prior year. Scott Trench, CEO of BiggerPockets, said the math "has simply gotten tougher" for new investors entering the strategy. The platform's internal modeling shows a typical BRRRR deal today delivers 8% cash-on-cash return, compared with 12% in 2022.

Higher rehab loan pricing is one factor. Another is the shift in DSCR (debt service coverage ratio) refinance rates, which now average 7.8% on the 30-year fixed product, per Kiavi data. Investors who completed rehab in 2021 and refinanced at 5.5% are experiencing structural advantage over new entrants.

"The spread between rehab financing and permanent financing is no longer as friendly," said Beth O'Brien, CEO of Finance of America Commercial. O'Brien said her firm has seen some investors delay the refinance leg of BRRRR, holding at the rehab-loan rate longer as they wait for permanent rates to decline.

Rent levels have provided some offset. National single-family rent growth came in at 3.1% year-over-year in February, according to CoreLogic's Single-Family Rent Index. Markets with stronger rent growth, including Chicago, St. Louis, and Cleveland, remain the most attractive for BRRRR, BiggerPockets analysis showed.

Property acquisition costs have also moderated in some Midwest markets. Realtor.com data showed the median listed price in Cleveland fell 1.4% year-over-year in March, while Pittsburgh prices were up just 0.8%. Those are the metros where BRRRR investor activity has held up best, said Dave Meyer, head of real estate strategy at BiggerPockets.

Lenders have responded to the cooler volume by tightening underwriting. The American Association of Private Lenders survey showed 62% of firms raised minimum credit scores for rehab loans in 2025, and 51% now require six months of liquid reserves post-closing, up from 41% in 2024. Newer investors, particularly those entering from W-2 jobs during the 2021 to 2023 boom, are finding approvals harder to obtain, Meyer added.