The BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) is a popular strategy for building a rental portfolio by purchasing value-add investment properties and then refinancing them once stabilized with tenants. While the concept itself is straightforward, the financing required to execute a BRRRR deal is more complex than traditional mortgages.

“BRRRR loans” is a broad term investors use to describe the two-loan financing structure used in BRRRR projects: a short-term investment property loan to acquire and renovate the property (aka “hard money loan") followed by a long-term rental loan to refinance and hold it.

This guide explains how BRRRR loans work, the investment property loan types involved, and how investors use hard money and DSCR loans to recover capital and repeat the process. We’ll also include a section with Ridge Street’s BRRRR Loan Products and examples of funded projects.

What Are Brrrr Loans?

BRRRR loans are not a single loan product. Instead, the term refers to the investment property loan structure used to finance BRRRR deals, which relies on two separate loans:

• A short-term hard money / fix-and-flip loan used to purchase and renovate the investment property
• A long-term DSCR rental loan used to refinance the property after it is leased and stabilized

Together, these loans allow real estate investors to recover much, or in some cases all, of their original cash investment and redeploy it into the next BRRRR project.

Why BRRRR Deals Require Specialized Investment Property Loans

Properties purchased for value-add rental strategies often can't be financed with traditional owner-occupied or conventional investment property mortgages. The physical condition of the asset for most BRRRR projects, renovation scope, and the investor’s exit strategy differ significantly from standard buy-and-hold purchases financed with conventional loans.

Many of these properties are distressed at acquisition, requiring major repairs and mechanical system upgrades before they can be rented. Conventional lenders typically require properties to meet minimum habitability standards at closing, which excludes a large portion of value-add acquisitions.

Speed is also an important factor. Investors frequently purchase through off-market transactions, auctions, or competitive situations where a 30- to 45-day closing timeline is not realistic. Short-term hard money loans are designed to close quickly and are underwritten based on the property’s after-repair value rather than the current condition.

Finally, this investment approach relies on a cash-out refinance after renovation is complete and properties are leased. Traditional mortgage programs often impose lengthy seasoning requirements, strict income documentation, and limits on the number of financed rental properties. Alternative investment property loans, such as Ridge Street’s DSCR Loan Program, allow refinancing based on rental income and appraised value instead of the borrower’s personal income.

For these reasons, investors typically use a two-loan financing structure specifically designed for renovation-to-rental projects rather than conventional mortgage products.

The Two-Loan Structure Used in BRRRR Financing

The first loan is a short-term acquisition and renovation loan also called a hard money loan or fix and flip loan. This financing covers up to 90% of the purchase of the property and up to 100% of the cost of renovations, allowing investors to acquire distressed assets and improve them to rentable condition, with as little as a 10% down payment.

The second loan is a rental refinance loan (typically a DSCR loan). Once the property is renovated, leased, the increased value (ARV) is achieved, the property cashflow is used to support long term rental property financing.

When a BRRRR project is financed correctly, investors can cash-out refinance their entire equity position at project completion and use those proceeds to repeat this BRRRR investment strategy.

This two-loan structure allows investors to move from acquisition to stabilization efficiently while recovering capital through a cash-out refinance rather than leaving funds tied up long term.

BRRRR Financing: Quick Review

Phase 1: Hard Money Loans for BRRRR Properties

Hard money loans are short-term investment property loans used to acquire and renovate properties that don't qualify for conventional financing. These loans are underwritten based on the property’s after-repair value (ARV) rather than the borrower’s personal income.

Because hard money lenders can close quickly in 7–14 days and because hard money loans include funding for renovation costs, this financing option is commonly used for distressed properties, off-market acquisitions, and time-sensitive transactions where speed is critical.

Ridge Street’s Hard Money Loan Terms

Basic Borrower Requirements

• Minimum credit score above 660 range
• Proof of funds for down payment and reserves
• Detailed scope of work and renovation budget
• Defined exit strategy (refinance or sale)
• Entity documentation if closing in an LLC

Ridge Street provides hard money financing for acquisition and renovation projects across 35 States, with programs structured to support renovation-to-rental strategies and reliable execution through closing and rehab draw funding.

Phase 2: DSCR Cash-Out Refinance Loans

After the property is renovated and leased, the short-term acquisition loan is replaced with a DSCR rental loan. This refinance provides long-term financing and, in many cases, allows investors to pull cash out based on the property’s new appraised value and cashflow.

DSCR (Debt Service Coverage Ratio) measures whether a property’s rental income is sufficient to cover its mortgage payment, taxes and insurance. Unlike conventional loans, DSCR loans are underwritten using the property cash flow, not the borrower’s W-2 income.

How DSCR Is Calculated

DSCR = Monthly Rent ÷ Monthly PITIA

A ratio above 1.0 indicates the property generates enough income to support the loan.

Ridge Streets Standard DSCR Loan Terms

Seasoning Requirements

Many DSCR lenders require 6 months of ownership before allowing a cash-out refinance based on the updated appraised value. Some programs offer reduced seasoning for renovation-to-rental projects, but requirements vary by lender.

At Ridge Street our DSCR Loans for the BRRRR Strategy are specifically designed for investors to be able to refinance 100% of their hard costs upon refinancing within the 6 months of the original purchase. This means, at cash-out, our DSCR program will allow BRRRR investors to finance up to 100% of the original purchase price, rehab budget, and refinance loan closing costs as long as the total loan amount is below 75% LTV.

Example: How BRRRR Loans Work in a Real Deal

The example below illustrates how a typical renovation-to-rental project is financed using a hard money loan followed by a DSCR cash-out refinance.

Deal Overview: BRRRR Project In Mississippi

BRRRR Project Parameters

• Purchase Budget: $127,500
• Renovation Budget: $40,000

Loan 1: Hard Money Loan

• Loan Amount: $148,375 (80% of Purchase Price + 100% Of Rehab Budget)
• Down Payment: $25,500
• Closing Costs (Lender Fees, Title, Insurance, etc): $5,100
• Loan Payments (4 Months): $5,440.42

Total Cost to Fix and Flip: $182,415.42

Loan 2: DSCR Cash-Out Refinance

• After Repair Value: $235,000
• DSCR loan: $176,250 (75%LTV)
• Refinance Closing Costs (Insurance, Title, Escrows): $4,800
• Payoff of short-term loan: ~$148,375
• Net cash returned to investor: ~$23,075

After refinancing, the investor recovers a significant portion of the original capital invested while retaining approximately $58,750 in equity (25% of the property’s after repair value). The property is now financed with long-term debt with the rental income covering the full cost of the mortgage, taxes, and insurance.

Pros and Cons of Using BRRRR Loans

BRRRR financing can accelerate real estate portfolio growth, but it also increases leverage and complexity compared to traditional buy-and-hold strategies.

Pros:

• Capital recycling allows investors to build a rental portfolio with limited recurring down payment funds.
• Hard money loans enable fast closings on distressed deals that conventional loans can't fund.
• Potential to own rental properties with minimal net cash invested after refinance.
• DSCR underwriting doesn't rely on personal W-2 income.
• Forced property appreciation through rehab creates additional equity.
• Specialized lenders offer competitive rates and terms for BRRRR investors with projects supported by strong financials.

Cons:

• Higher interest rates and fees compared to most conventional loans used in buy-and-hold investing.
• Appraisal risk: if the after repair value comes in lower than projected, cash-out proceeds can be less than expected.
• Refinance risk: rising interest rates between purchase and refi can reduce DSCR and maximum loan amount.
• Seasoning requirements may force longer hard money carry times than expected.
• Renovation costs or timelines can exceed projections, eating into returns.
• DSCR thresholds may limit leverage in markets where monthly rent doesn't strongly cover mortgage payments.

Risk Example: If an investor purchases a property in January with a projected DSCR of 1.25 at 6% rates, but rates rise to 7% by the time they refinance in July, the DSCR may drop to 1.05-1.10. This could mean lower cash-out proceeds or a higher rate tier.

How to Choose a BRRRR-Friendly Investment Property Lender

Not all investment property lenders are structured to support BRRRR projects. Choosing a lender that understands the timing, underwriting, and execution requirements of these deals can significantly reduce delays and refinance risk.

Ridge Street is built to support this financing structure by focusing on the key factors that matter most in renovation-to-rental transactions.

What to Look for in a BRRRR-Friendly Lender

• Experience with renovation-to-rental financing: Ridge Street structures hard money loans with the expectation of a future refinance, helping investors align their initial investment with a clear exit strategy.
• Reliable acquisition and renovation funding: Ridge Street provides short-term financing for both property acquisition and renovation, allowing investors to complete projects without relying on multiple capital sources.
• Predictable draw and closing processes: Consistent draw procedures and clear communication help reduce delays during construction and lease-up.
• BRRRR-aligned execution: Loan structures are designed to support renovation, stabilization, and a clean transition to long-term rental financing.
• Multi-state lending capabilities: Ridge Street operates across 35 states, allowing investors to apply the same financing approach across different markets.

Selecting a lender that understands renovation-to-rental financing reduces execution risk and helps ensure the refinance phase aligns with the original investment plan.

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