Loan type
BRRRR and rental exits
Buy, rehab, rent, refinance, repeat - financed with a hard money bridge and taken out by a long-term rental loan. The strategy lives or dies on the refinance.
At a glance
| What it funds | Purchase and rehab of a property you intend to keep and rent |
|---|---|
| Purchase financing | 80%-90% of price |
| Rehab financing | Up to 100%, drawn |
| Rate | 8.0% to 15.0% |
| Term | 12 months typical |
| Exit | DSCR or conventional rental refinance |
| The binding constraint | Refinance appraisal, DSCR, and seasoning |
A good fit when
The rent supports a DSCR above 1.20 at realistic refinance rates, and the seasoning requirement fits comfortably inside your bridge term.
A poor fit when
The refinance math only works at an appraised value you are hoping for, or the seasoning period leaves you a window of under three months.
BRRRR uses two loans. The hard money bridge buys and renovates; the rental refinance repays it and leaves you holding the asset with, ideally, most of your capital returned.
Everything about whether it works is decided by the second loan, and almost everyone underwrites the first one.
The three things that break it
- The appraisal
- Your refinance loan is a percentage of appraised value, commonly 70-75%. If the value comes in 8% under your ARV, the loan comes in 8% under your model, and the shortfall is cash you have to find at the refinance table.
- DSCR
- Rental lenders qualify on the ratio of rent to the new loan's PITIA. Most want 1.20 or better. If it does not clear, the loan is reduced until it does - which reduces your cash-out again.
- Seasoning
- Many lenders will not use the new appraised value until you have owned the property for a set period, commonly six months. Refinance earlier and you may be capped at purchase price plus documented improvements, which defeats the entire point.
Do this before you take the bridge
- Get a DSCR lender to look at the deal while you are still shopping bridge quotes. A soft pre-approval costs nothing.
- Confirm their seasoning requirement and their maximum cash-out LTV in writing.
- Get a rent estimate you can defend - actual comparable leases, not a portal estimate.
- Run the DSCR at a refinance rate 0.75 points above today's. Rates move over the twelve months you will be holding.
- Model the deal with the refinance appraisal 10% below your ARV, and see whether you can still close it.
The honest version of "infinite returns"
Pulling 100% of your capital back out requires the refinance loan to exceed your total cash in and your bridge payoff. That requires buying well below value, an efficient rehab, and an appraisal that cooperates. It happens. It is not the base case, and models that assume it are the reason people are surprised.
Questions people actually ask
Can I get a hard money loan for the BRRRR method?
Yes, and it is one of the two main uses of the product. The hard money loan funds the buy and the rehab; the refinance into a long-term rental loan is the exit that repays it. The whole strategy lives or dies on that refinance, so the question to answer before you borrow is not whether you can get the hard money - it is whether the refinance will appraise and cash-flow.
Can hard money loans be refinanced?
Yes - that is the intended exit for any buy-and-hold deal. The refinance is normally into a DSCR rental loan, which qualifies on the property's rent rather than your income.
Two traps. Seasoning: many lenders will not lend against the new appraised value until you have owned the property for a set period, commonly six months; refinance before that and you may be capped at your purchase price plus documented rehab instead. Timing: if your hard money term is 12 months and your seasoning is 6, you have a narrow window, and appraisal delays eat it fast.
Are DSCR loans considered hard money loans?
No, though they are often sold by the same lenders and confused constantly. A DSCR loan is long-term rental financing - typically 30 years, amortising, qualified on the property's cash flow instead of your tax returns. Hard money is short-term, interest-only, asset-based bridge capital. They are complements, not substitutes: hard money buys and renovates the property, the DSCR loan takes it out.
What's the downside of a DSCR loan?
Rates above conventional owner-occupied pricing, prepayment penalties that are common and sometimes steep, a hard floor on the debt-service ratio that a vacancy can breach, and reliance on a market-rent opinion that may not match what you actually collect. It is still usually far cheaper than staying in hard money.
How risky is hard money lending?
For the borrower, the risk concentrates in the term ending before the exit is ready, and in the personal guarantee that usually sits behind the loan. For the lender, the risk is a collateral value that turns out to be wrong. The product is not inherently dangerous; a short term against an uncertain exit is.