DSCR Loans · 2 min read
BRRRR: Refinancing From Hard Money Into a DSCR Loan
How the BRRRR strategy works: buying and rehabbing with hard money, then refinancing into a DSCR loan, with seasoning and cash-out math.
This guide is part of our DSCR & Long-Term Rental Loans hub.
BRRRR stands for buy, rehab, rent, refinance, repeat. It lets investors recycle capital: buy a property below value with short-term money, add value, then refinance into long-term DSCR debt and pull cash out for the next deal.
Step 1: Buy and rehab with hard money
Distressed properties rarely qualify for long-term loans. A hard money loan funds the purchase and renovation, with rehab money released through draws. Buy with enough discount that the finished value supports your refinance.
Step 2: Rent it
A signed lease at market rent strengthens your refinance. Lenders use the lower of the lease or the appraiser’s market rent to calculate DSCR.
Step 3: Refinance into a DSCR loan
The DSCR loan pays off the hard money loan. If the new appraised value is high enough, a cash-out refinance returns some or all of your invested capital.
Seasoning: the timing that matters
Many lenders require a minimum ownership period, called seasoning, before they will base a cash-out refinance on the new appraised value instead of your purchase price. Requirements vary, so confirm them before you buy. Plan your hard money term so it does not expire before you can refinance.
Run the numbers before you buy
- Estimate ARV. See how to calculate ARV.
- Apply the lender’s cash-out LTV to ARV to find your maximum new loan.
- Subtract your hard money payoff and closing costs to estimate cash back.
- Check the new payment against market rent. See how to calculate DSCR.
Common BRRRR mistakes
- Overestimating ARV, which shrinks the cash-out.
- A hard money term too short for the seasoning requirement.
- Rent that cannot support the larger refinanced loan.
- Rehab overruns that eat the equity you planned to pull out.
Related guides
Explore the full hub: DSCR & Long-Term Rental Loans. Other financing: Fix and Flip & Hard Money Loans · Commercial Real Estate Loans · Unsecured Business Loans · Trust Deed Investing.
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Terms, leverage and timelines vary by lender, property and borrower qualifications. This article is general information, not financial, legal or investment advice, and not a commitment to lend.