--- title: "When to Kill a BRRRR Deal: The DSCR Test | Addicted to ROI" description: "Most failed BRRRRs die at the refinance. How to test your deal against a 1.2 DSCR before you buy, and when to pivot to a flip instead of forcing it." lang: en json-ld: | [ { "@context": "https://schema.org", "@type": "Organization", "@id": "https://addictedtoroi.com/#organization", "name": "Addicted to ROI", "url": "https://addictedtoroi.com", "logo": { "@type": "ImageObject", "url": "https://addictedtoroi.com/images/logo.png" }, "description": "Live your best life funded by your investments. Real estate, taxes, travel, and business, by Jennifer Beadles.", "founder": { "@id": "https://addictedtoroi.com/#jennifer" }, "sameAs": [ "https://agentsinvest.com", "https://doorprofit.com", "https://repstime.com", "https://strhours.com", "https://kidspayroll.com", "https://rentstager.com" ] }, { "@context": "https://schema.org", "@type": "WebSite", "@id": "https://addictedtoroi.com/#website", "url": "https://addictedtoroi.com", "name": "Addicted to ROI", "publisher": { "@id": "https://addictedtoroi.com/#organization" }, "potentialAction": { "@type": "SearchAction", "target": { "@type": "EntryPoint", "urlTemplate": "https://addictedtoroi.com/blog/?q={search_term_string}" }, "query-input": "required name=search_term_string" } }, { "@context": "https://schema.org", "@type": "Person", "@id": "https://addictedtoroi.com/#jennifer", "name": "Jennifer Beadles", "url": "https://addictedtoroi.com/about/", "jobTitle": "Founder, Addicted to ROI", "description": "Real estate investor and founder of Addicted to ROI. Built an 8-figure rental portfolio across multiple states and teaches everyday investors how to build passive income.", "worksFor": { "@id": "https://addictedtoroi.com/#organization" }, "sameAs": [ "https://agentsinvest.com", "https://doorprofit.com", "https://repstime.com", "https://strhours.com", "https://kidspayroll.com", "https://rentstager.com" ] }, { "@context": "https://schema.org", "@type": "Article", "mainEntityOfPage": { "@type": "WebPage", "@id": "https://addictedtoroi.com/blog/when-to-kill-brrrr-deal/" }, "headline": "When to Kill a BRRRR Deal: The DSCR Test Most Investors Skip", "description": "Most failed BRRRRs die at the refinance. How to test your deal against a 1.2 DSCR before you buy, and when to pivot to a flip instead of forcing it.", "image": "https://images.unsplash.com/photo-1503387762-592deb58ef4e?w=800&q=80", "datePublished": "2026-07-08", "dateModified": "2026-07-08", "author": { "@id": "https://addictedtoroi.com/#jennifer" }, "publisher": { "@id": "https://addictedtoroi.com/#organization" }, "speakable": { "@type": "SpeakableSpecification", "cssSelector": [ ".tldr-answer", "h1" ] } }, { "@context": "https://schema.org", "@type": "BreadcrumbList", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://addictedtoroi.com" }, { "@type": "ListItem", "position": 2, "name": "Blog", "item": "https://addictedtoroi.com/blog" }, { "@type": "ListItem", "position": 3, "name": "Deal Analysis", "item": "https://addictedtoroi.com/blog?category=deal-analysis" }, { "@type": "ListItem", "position": 4, "name": "When to Kill a BRRRR Deal: The DSCR Test Most Investors Skip", "item": "https://addictedtoroi.com/blog/when-to-kill-brrrr-deal/" } ] }, { "@context": "https://schema.org", "@type": "FAQPage", "mainEntity": [ { "@type": "Question", "name": "What DSCR do I need to refinance a BRRRR?", "acceptedAnswer": { "@type": "Answer", "text": "Most DSCR lenders want a minimum debt service coverage ratio of 1.2. Test your deal at the refinance stage before you buy: if you can only hit 1.2 by shrinking the loan far below 70-75% LTV, your capital stays trapped and the BRRRR premise fails." } }, { "@type": "Question", "name": "When should you walk away from a BRRRR deal?", "acceptedAnswer": { "@type": "Answer", "text": "When the refinance leaves significant cash trapped in the deal and the property cash flows negative afterward. At that point a turnkey purchase would outperform it. Before walking, test the same property as a flip; sometimes the strategy is wrong, not the deal." } }, { "@type": "Question", "name": "Is it worth adding square footage to increase ARV?", "acceptedAnswer": { "@type": "Answer", "text": "Rarely. Additions on inexpensive houses carry appraisal risk and construction cost risk that usually exceed the value created. Reconfiguring the existing footprint (like converting a 2/1 to a 3/2) is almost always the better play." } } ] } ] --- [![Addicted to ROI](/images/logo.png)](/) [Travel](/pillars/travel/)[Real Estate](/pillars/real-estate/)[Tax Savings](/pillars/tax-savings/)[Business](/pillars/business/)[Paths](/paths/)[Blog](/blog/)[Tools](/tools/)[Apps](/software/)[About](/about/) [Login](https://members.addictedtoroi.com/) Subscribe [Travel](/pillars/travel/)[Real Estate](/pillars/real-estate/)[Tax Savings](/pillars/tax-savings/)[Business](/pillars/business/)[Paths](/paths/)[Blog](/blog/)[Tools](/tools/)[Apps](/software/)[About](/about/)[Login](https://members.addictedtoroi.com/) Contents 1. [01 The refinance test: 1.2 DSCR ](#the-refinance-test-12-dscr) 2. [02 The kill test ](#the-kill-test) 3. [03 Before you kill it: two pivots ](#before-you-kill-it-two-pivots) 4. [04 Mind the financing stack too ](#mind-the-financing-stack-too) [Home](/)/ [Blog](/blog/)/ [Real Estate](/pillars/real-estate/) Deal Analysis # When to Kill a BRRRR Deal: The DSCR Test Most Investors Skip Most failed BRRRRs die at the refinance. Here's how to test your deal against a 1.2 DSCR before you buy, and when to pivot to a flip instead of forcing it. July 8, 2026 7 min read Contents 1. [01\. The refinance test: 1.2 DSCR](#the-refinance-test-12-dscr) 2. [02\. The kill test](#the-kill-test) 3. [03\. Before you kill it: two pivots](#before-you-kill-it-two-pivots) 4. [04\. Mind the financing stack too](#mind-the-financing-stack-too) tl;dr Most failed BRRRRs die at the refinance, not the rehab. Before you make the offer, test the deal against a 1.2 DSCR. If you can only hit it by shrinking the loan far below 70 to 75% LTV, your cash stays trapped and the BRRRR premise fails. When it does, run the same property as a flip before you walk away. BRRRR deals don't usually die during the rehab. They die at the refinance, months after you've committed, when the permanent loan you were counting on doesn't cover what you put in. The good news: you can run that test before you ever make the offer. Most investors skip it. (If you're new to the strategy itself, start with [the BRRRR strategy overview](/blog/the-brrrr-strategy-recycle-your-cash/) and come back.) On one of our Deal Analysis calls, a member brought an off-market deal that walks right through the test. Asking price $65,000, hoping to negotiate to $60,000. A 2-bed/1-bath under 1,000 square feet, with a contractor-estimated rehab of $90,000 taking it down to the studs and reconfiguring to a 3/2 within the existing footprint. ARV around $200,000, projected rent $1,500 a month. Sounds workable. Here's what the numbers said. ## The refinance test: 1.2 DSCR For a DSCR refinance, lenders want a debt service coverage ratio of at least 1.2, meaning the property's net operating income covers the new mortgage payment 1.2 times over. We tested this deal live at a 75% LTV refinance: the DSCR came out at 0.75. Fail. We dropped to 70% LTV: still failed. 65%: still failed. To actually hit 1.2, the loan needed to shrink to somewhere around 57% LTV. Think about what that means. The whole point of a BRRRR is pulling your capital back out at the refinance. At 57% LTV, this "refinance" becomes a cash-in event, and the deal left about $26,000 trapped, with negative monthly cash flow on top. There are only two levers that genuinely fix a failing DSCR: a lower interest rate or higher revenue. You can't fudge the expenses, because then the underwriting stops being realistic. If neither lever moves enough, believe the number. ## The kill test Here's the rule this deal makes obvious: if a BRRRR leaves significant cash trapped in the deal and cash flows negative after the refinance, kill it or restructure it. As I said on the call, that's a lot of effort to go through for leaving $26K in the deal and having negative cash flow. You'd be better off buying something more turnkey than going through the whole BRRRR process for that outcome. The only time I accept negative cash flow is a true development play I'd feel confident feeding for 12 to 24 months because there's a big payout at the end. A negative-cash-flow rental with no payout event is just a liability with tenants. ## Before you kill it: two pivots A failed BRRRR isn't always a dead deal. It's often the wrong strategy on a live one. ### Pivot 1: run it as a flip Same house, same rehab, different exit. This deal penciled at roughly $160,000 all-in against a $200,000 ARV. That's thin for a flip once you add holding and selling costs, but it's a real analysis worth running, and on some deals the flip math shines where the BRRRR math fails. I underwrite both exits side by side in [DoorProfit](https://doorprofit.com) before deciding. ### Pivot 2: rethink the value-add One idea floated on the call was adding square footage to push the ARV. My rule: it almost never makes sense to do an addition to an existing property, especially a cheap one. Appraisal risk plus cost risk eat the upside. Work within the existing footprint (this rehab already converted a 2/1 to a 3/2 without adding a foot), or if the lot genuinely supports it, look at new construction as its own deal with its own numbers. ## Mind the financing stack too Two more numbers from this deal worth internalizing. Condition-based acquisitions need hard money or private money, and hard money runs 10 to 12% (model 12% to be conservative), while a private lender might be closer to 8%. That spread is another argument for building private lender relationships, which I break down in [how to finance a rental portfolio with other people's money](/blog/how-to-finance-a-rental-portfolio-other-peoples-money/). And if it's your first rehab, at distance, with new construction ideas attached: this probably isn't your deal. It might be a good deal for someone. On the call, my honest advice was to consider bringing in an experienced partner, and if you go that route, [structure the partnership the right way](/blog/jv-partnerships-vs-syndication-raise-capital/). _This article is for educational purposes only and is not tax, legal, or financial advice. Consult a qualified CPA or tax attorney about your specific situation._ Addicted to ROI is education and community, not financial or tax advice. Talk to a qualified professional before making investment or tax decisions. ![Jennifer Beadles](/images/founders.jpg) Jennifer Beadles Real estate entrepreneur with 17 years of hands-on investing experience. Built an 8-figure rental portfolio across multiple states and has helped thousands of investors build passive income through the Addicted to ROI community. The tool that goes with this ## The software that does this for you [ Deal analysis DoorProfit Type in a price and watch cash flow, cash-on-cash, cap rate and NOI move in real time, then save, compare and share underwriting across your whole pipeline. Analyze a deal ↗ ](https://doorprofit.com)[ Agent match Agents Invest Tell us the market and the strategy, and we match you with a vetted, investor-friendly agent who knows how to run a rental analysis, not just sell you a house. Match me with an agent ↗ ](https://agentsinvest.com) Before you close the tab ## Get the next one in your inbox. 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[Subscribe, free →](/newsletter/)[Run a deal in the calculator](/tools/deal-analysis-calculator/) Read next [ ![How to Renovate a Rental You've Never Seen in Person](https://images.unsplash.com/photo-1581578731548-c64695cc6952?w=800&q=80) Investment Strategies ### How to Renovate a Rental You've Never Seen in Person 10 min read → ](/blog/renovate-out-of-state/)[ ![How to Determine Fair Market Rent in a Market You Don't Live In](https://images.unsplash.com/photo-1554469384-e58fac16e23a?w=800&q=80) Deal Analysis ### How to Determine Fair Market Rent in a Market You Don't Live In 8 min read → ](/blog/fair-market-rent/)[ ![The Questions to Ask Before You Buy in a Market You Don't Live In](https://images.unsplash.com/photo-1423666639041-f56000c27a9a?w=800&q=80) Due Diligence ### The Questions to Ask Before You Buy in a Market You Don't Live In 9 min read → ](/blog/market-call-questions/) If you like this ## Read these next Hand-picked to go deeper on real estate. [![How to Renovate a Rental You've Never Seen in Person](https://images.unsplash.com/photo-1581578731548-c64695cc6952?w=800&q=80) Real Estate ### How to Renovate a Rental You've Never Seen in Person 10 min read](/blog/renovate-out-of-state/) [![How to Determine Fair Market Rent in a Market You Don't Live In](https://images.unsplash.com/photo-1554469384-e58fac16e23a?w=800&q=80) Real Estate ### How to Determine Fair Market Rent in a Market You Don't Live In 8 min read](/blog/fair-market-rent/) [![The Questions to Ask Before You Buy in a Market You Don't Live In](https://images.unsplash.com/photo-1423666639041-f56000c27a9a?w=800&q=80) Real Estate ### The Questions to Ask Before You Buy in a Market You Don't Live In 9 min read](/blog/market-call-questions/) [![How to Invest Out of State Without Getting Burned (The One Trap)](https://images.unsplash.com/photo-1500382017468-9049fed747ef?w=800&q=80) Real Estate ### How to Invest Out of State Without Getting Burned (The One Trap) 8 min read ](/blog/invest-out-of-state/) Off to go build something. 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