Finance Brain
Courses
Home
Sign in
← Risks and Limitations of BRRRR
1 / 4
Question
Why do cost overruns in the refurbishment phase pose a specific risk to the BRRRR strategy rather than just representing a higher investment?
1
Because lenders require a fixed refurbishment cost agreement before approving bridge financing
2
Because BRRRR relies on the refinanced value returning the total investment; cost overruns reduce the margin between total cost and ARV, potentially leaving capital permanently tied up and making the capital recycling promise fail
3
Because HMRC does not allow tax deductions for refurbishment costs that exceed the original budget
4
Because cost overruns typically cause refurbishment quality to fall below the standard required for the property to be mortgageable
Press 1–4 to pick an answer
Finance Brain