BRRRR Loans: Buy, Rehab, Rent, Refinance, Repeat

What is a BRRRR loan?

BRRRR stands for buy, rehab, rent, refinance, repeat. You buy a property that needs work, fix it, rent it, refinance it into a long term loan, and use the cash you pull out on the next deal.

There is no single loan that does all of that. BRRRR financing is a short term bridge loan on the front end and a DSCR loan on the back end. The trouble most investors run into is that those two loans get arranged by different people at different times, and the refinance does not match what the bridge assumed.

If you searched for a BRRRR lender, here is how I work. I'm a mortgage broker, NMLS 1649161, with Vision Mortgage. I review the purchase, the rehab and the rental exit together, then line up the bridge and the refinance so they fit. Before you make an offer, run the expected rent and the full payment through my DSCR calculator so you know whether the refinance can work.

The goal is simple. When the rehab is done, the refinance should already be lined up, with no surprises about the rent, the appraisal or the ownership. That takes a look at both loans before the purchase, not after.

These loans are for 1 to 4 unit residential rentals, including single family homes, condos and townhomes. They are non owner occupied only.

How the five steps work

Buy. The first loan is short term bridge financing to purchase the investment property. It is interest only during the bridge, which keeps the carrying cost down while the house is empty and torn apart.

Rehab. Up to 100% of rehab costs can be financed. Not everyone will qualify. The rehab money is usually released in draws as the work gets done and checked, so your budget and your contractor schedule matter from the start.

Rent. Once the work is finished, the property needs a rent number. That can come from a signed lease, or from a 1007 rent schedule, which is the appraiser's market rent analysis. The 1007 is what lets a vacant property refinance.

Refinance. The bridge gets paid off with a DSCR loan. On the programs I use for this, there is no seasoning requirement, so cash out is available once the rehab is complete.

Repeat. The cash you pull out goes toward the next purchase and the next rehab. That is the whole point of the method, and it only works if the refinance comes through the way you planned.

Why seasoning matters and what no seasoning changes

Seasoning is how long you have to own a property before a lender will use the new appraised value for a cash out refinance. Many programs want 6 to 12 months. During that time your cash sits in the house and the bridge keeps running.

With no seasoning requirement, the clock is the rehab, not the calendar. When the work is complete and the property appraises, you can refinance and take cash out instead of waiting half a year or more. That can mean fewer months of bridge interest and a faster start on the next property.

No seasoning does not mean no review. The appraisal still has to support the value, the rent still has to support the payment, and the file still needs credit and reserves. I go deeper on how this works in my guide to the no seasoning cash out refinance.

Refinancing a vacant property with a 1007 rent schedule

A common question is whether you need a tenant before you refinance. You do not. A DSCR loan on a vacant property can use the 1007 rent schedule, which is the appraiser's opinion of market rent based on comparable rentals nearby. Tenant in place or not, the refinance can move forward.

That matters for BRRRR because the best time to refinance is right after the rehab, and that is often before you have signed a lease. You do not have to rush a tenant just to close.

The catch is that the appraiser sets the rent number, not you. If your plan assumed a higher rent than the comps support, the DSCR comes in lower than you expected. Run a conservative rent on my DSCR calculator before you buy, and again before you order the refinance appraisal.

How the DSCR is figured

DSCR is the rent divided by the full monthly payment. The full payment means principal, interest, property taxes, insurance and any association dues. It is not just the loan payment.

If the rent covers the full payment, the ratio is at or above 1.0. If it falls short, the ratio is below 1.0. Each program has its own minimum, and some will look at files below 1.0 with more down payment or reserves. If the numbers are tight, my no ratio DSCR loan page explains another option.

Qualification is on the property and the plan. I do not need pay stubs, W2s or tax returns, and there is no debt to income ratio test. I still review credit, reserves and the property itself.

Plan the exit before you buy

Most BRRRR deals that go wrong go wrong at the refinance, and most refinance problems were visible before the purchase. Here is what I look at up front.

Rent comps. Look at what similar rentals actually lease for, not the asking rents on the best units in town. The appraiser will use comparable rentals, so you should too.

Rehab budget and draws. Build a budget with real contractor bids and a cushion for surprises. Know how the draw schedule works, because your contractor needs to be paid before each draw is released.

After repair value. The after repair value drives how much cash you can pull out. Base it on recent sales of renovated homes nearby, not on what you hope the house will be worth.

Reserves. Keep cash for carrying costs during the rehab, for overruns, and for the reserves the refinance will require. Running out of cash in the middle of a rehab is the fastest way to lose control of a deal.

If the property will be a short term rental instead of a long term rental, the income documentation is different. My short term rental loans page covers that.

What I need to review a deal

Send me the property address and the purchase price, or your current loan details if you already own it. Include the rehab scope and budget, your contractor bids if you have them, and your estimate of the after repair value.

I also want your expected rent and any rent comps you have pulled, the property taxes, an insurance quote if you have one, and any association dues. Tell me your credit range, the cash you have for the down payment and reserves, and how you plan to own the property.

With that, I can tell you whether the bridge and the refinance fit together, and where the numbers are thin. You can text me at (207) 615-7770 or start with the DSCR application on this page.

BRRRR vs fix and flip vs fix and hold

A fix and flip loan is built for an investor who renovates and sells. The exit is a sale, so the long term rental loan never comes into it.

A fix and hold loan funds the purchase and rehab of a rental you plan to keep. BRRRR is a fix and hold with a specific goal: refinance quickly, pull cash out, and use it again on the next property.

The difference shows up in planning. A flip lives or dies on the sale price. A BRRRR lives or dies on the appraisal and the rent. If you are not sure which path a property fits, I can run it both ways.

If you are buying a home to live in while you sell your current one, that is a different product. My Maine bridge loans and Florida bridge loans pages cover residential bridge financing for your own home, not investment property.

LLC or personal name

BRRRR financing is available in the 37 states where I arrange DSCR loans. In Montana, the loan closes in an LLC. In the other states, you can close in an LLC or in your personal name.

Many BRRRR investors use an LLC because they plan to own several properties. If you are setting one up, do it before the purchase so the bridge and the refinance close in the same name. My DSCR loans in an LLC page covers the documents I review.

New to investing? My first time investor DSCR page explains what still matters when you do not have a track record. You can also read my earlier fix and hold and BRRRR loan guide.