Why Canada’s Favourite Real Estate Investing Model Isn’t Working Like It Used To
For years, the BRRRR strategy seemed almost foolproof.
Buy an undervalued property. Renovate it. Rent it. Refinance based on the increased value. Repeat.
Thousands of investors built substantial portfolios using this model. Social media was filled with success stories of investors pulling out every dollar they invested—sometimes even making money at refinance—before moving on to their next property.
But today’s market tells a very different story.
Across Canada, and even in many U.S. markets, investors are discovering that the numbers simply don’t work the way they once did. Projects that would have generated six figures in forced equity just a few years ago are barely breaking even today.
Does that mean BRRRR is dead?
Not exactly.
But the version of BRRRR that created countless millionaires over the past decade has fundamentally changed.
Why BRRRR Worked So Well
The strategy thrived because several powerful market forces aligned perfectly.
Interest rates were historically low.
Property values appreciated rapidly.
Banks were eager to lend.
Construction costs were relatively predictable.
Rent growth was strong.
Most importantly, investors could manufacture equity faster than acquisition and renovation costs increased.
Imagine purchasing a duplex for $500,000.
You invest $75,000 into renovations, bringing your total investment to $575,000.
After renovations, the property appraises for $725,000.
At a 75% loan-to-value refinance, you could borrow approximately $544,000—recovering nearly all of your invested capital.
The result?
You retained ownership of the property while recycling your cash into the next investment.
Repeat this process several times and your portfolio could grow surprisingly quickly.
Unfortunately, today’s numbers often look very different.
The Perfect Storm That Changed Everything
Several economic shifts have dramatically altered the BRRRR equation.
Higher Interest Rates
Higher borrowing costs have affected almost every stage of the process.
Acquisition financing costs more.
Construction financing costs more.
Mortgage qualification has become more difficult.
Monthly cash flow has been squeezed.
Even properties that generate strong rents often produce significantly less positive cash flow than they once did.
Investors who relied on refinancing now discover that debt servicing limits often reduce how much they can actually borrow—even if the property appraises higher.
Renovation Costs Have Skyrocketed
Material costs remain significantly above pre-pandemic levels.
Labour shortages continue to drive contractor pricing higher.
Permits take longer.
Insurance costs have increased.
Unexpected renovation expenses have become more common.
Many investors budget using numbers from five years ago only to discover today’s renovation costs are 30-60% higher than expected.
The margin for error has become razor thin.
Appreciation Has Slowed
One of the hidden drivers behind successful BRRRR projects wasn’t just renovations.
It was market appreciation.
Many investors believed they were creating enormous value through renovations when, in reality, a significant portion came from a rapidly appreciating housing market.
Today’s market is much flatter.
Properties often appraise based primarily on comparable sales rather than optimistic future growth.
Without rapid appreciation, forcing equity through renovations alone becomes much more difficult.
Banks Have Become More Conservative
Even when renovations go perfectly, refinancing isn’t guaranteed.
Lenders are taking a closer look at:
- Debt service ratios
- Rental income assumptions
- Borrower income
- Existing portfolio leverage
- Market risk
Many investors discover that although their property appraised well, they simply cannot qualify for the amount they expected.
That leaves capital trapped inside the property.
Cash Flow Is Harder To Find
The traditional BRRRR model depends on healthy rental income.
Unfortunately, many markets no longer produce attractive cash flow after accounting for:
- Higher mortgage payments
- Property taxes
- Insurance
- Maintenance
- Vacancy
- Property management
Investors who once expected several hundred dollars per month in positive cash flow may now find themselves operating at break-even—or worse.
The Math No Longer Works
Consider a simplified example.
2019
Purchase Price: $500,000
Renovation: $60,000
Total Investment: $560,000
After Repair Value: $700,000
75% Refinance: $525,000
Cash Left In Deal: Approximately $35,000
Positive monthly cash flow.
Now compare that to many markets today.
2026
Purchase Price: $700,000
Renovation: $120,000
Total Investment: $820,000
After Repair Value: $875,000
75% Refinance: $656,250
Cash Left In Deal: More than $160,000
Higher monthly mortgage.
Lower cash flow.
Far less capital available for the next purchase.
The strategy hasn’t disappeared.
The economics have simply become much less forgiving.
The Biggest Mistake Investors Are Making
Many investors continue underwriting deals using yesterday’s assumptions.
They assume:
“I’ll refinance all my money back.”
“I’ll get a higher appraisal.”
“The market will appreciate.”
“My contractor’s estimate is accurate.”
Those assumptions are becoming increasingly dangerous.
Successful investors now build significant safety margins into every deal.
If the refinance comes in lower than expected, the project should still make sense.
So Is BRRRR Dead?
No.
But the easy version certainly is.
Today’s successful investors are adapting rather than abandoning the strategy.
They are buying deeper discounts.
Negotiating harder.
Adding secondary suites.
Increasing rental income.
Holding properties longer.
Focusing on operational improvements instead of relying solely on appreciation.
In many cases, investors are combining BRRRR with other wealth-building strategies instead of depending entirely on refinancing.
What Smart Investors Are Doing Instead
Many experienced investors are shifting toward strategies that emphasize long-term fundamentals over short-term equity creation.
Some are purchasing purpose-built multifamily properties where scale improves efficiency.
Others are investing in value-add commercial real estate.
Many are partnering with experienced operators through private equity and real estate syndications rather than managing every project themselves.
Some are simply keeping more cash in each property and accepting slower portfolio growth in exchange for greater financial stability.
The objective has changed.
Instead of maximizing leverage, investors are prioritizing resilience.
The New Rules of BRRRR
If you’re planning a BRRRR project today, consider these principles:
Buy below market value. Discounts matter more than ever.
Stress-test every deal. Assume higher vacancies, slower refinances and unexpected expenses.
Don’t rely on appreciation. Make sure the numbers work based on today’s values.
Prioritize cash flow. Equity alone doesn’t pay the bills.
Keep larger reserves. Liquidity can be the difference between surviving a downturn and being forced to sell.
Be patient. Portfolio growth may happen more slowly, but sustainable investing almost always wins over aggressive leverage.
Here’s the thing
Every investing strategy has its season.
The BRRRR strategy flourished during one of the most favourable real estate environments in history.
Today’s market requires a different mindset.
Investors who continue chasing yesterday’s playbook may find themselves frustrated by disappointing appraisals, tighter lending conditions and shrinking cash flow.
Those who adapt, by buying better, underwriting more conservatively and focusing on long-term wealth creation can still build impressive portfolios.
The era of easy BRRRR investing may be over.
But the opportunity to create wealth through real estate is far from dead.
As always, markets evolve. The investors who succeed aren’t necessarily the ones with the most capital or the biggest portfolios. Tthey’re the ones who recognize when the rules have changed and adjust before everyone else does.
Let’s build wealth the smart way, together!
And, if you’re thinking about buying, selling or investing in Durham Region or Toronto, let’s chat! I can be reached at 647-896.6584, by email at info@serenaholmesrealtor.com or by filling out this simple contact form.
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