Remove retaining clip. The first step is to remove the retaining clip from the brake caliper. Use a flat head screwdriver to pry out the retaining clip.
Remove plastic caps. Use a flat head screwdriver to pry out the black caps. This will allow you to get access to the guide pins.
Loosen caliper guide pins. Unscrew two caliper hose guide pins. They don't need to come out completely, just enough so that they are no longer screwed into the caliper bracket.
Remove brake caliper. Secure the caliper to the strut. Make sure it is not hanging by the brake hose.
Remove the caliper bracket. Remove two 19mm bolts that mount the caliper bracket to the rear hub. You may need to use a breaker bar to get these two bolts loose.
Remove the set screw. Remove the 5mm Allen bolt that holds the rotor to the rear wheel hub. Spray penetrating oil on the bolt if it refuses to come off. Be careful with this bolt because it can easily strip.
Remove rotor. The next step is to remove the rotor. On older BMWs, the rotor will be rusted, and it will be difficult to come off. Spray penetrating oil on the rotor. Rember to have the car secured so that it does not roll. Next, release the parking brakes. This is very important. If you don't release the parking brakes, you will damage the parking brake shoes. Use a rubber mallet to get the rotor off.
Install rotor. Use a wire brush to clean any rust on the wheel hub. Next, install the new BMW rotor and the set screw.
Install caliper bracket. Install rear caliper and torque the bracket bolts to 80 ft-lb.
Place brake pads on the caliper. Install the brake pads on the caliper. Apply brake anti-seize lube to the back of the pads.
Install brake caliper. Next, install the caliper with the new brake pads. Torque caliper bolts to 25 lb-ft.
Install the brake wear sensor. The new BMW brake wear sensor will slide into the channel on the inner brake pad. Connect the sensor to the black box under the wheel well.
Inspect brakes. Install the wheel and lower the vehicle. Start the car and pump the brake pedal until it gets hard. Next, check the brake fluid level and add brake fluid if the level is low. Follow this guide on how to check/add BMW brake fluid.