What does the BRRRR method stand for, and what is the key risk in the strategy?

The BRRRR strategy involves buying a distressed property, rehabbing it to force appreciation, renting it out to establish income, then doing a cash-out refinance based on the new appraised value to pull out your invested capital and repeat the process with a new property. The primary risk is that the after-repair value comes in lower than expected, meaning the cash-out refinance leaves significant equity trapped in the property. Additionally, if the refinance loan is too large relative to the rental income, the property may generate negative cash flow, and the investor is left with debt tied up in an underperforming asset.