BRRRR Financing Options: How to Fund Each Phase

Market Context

Phase 1: Acquisition and Rehab Financing

Hard money loans are the most common tool for BRRRR acquisition and rehab. They lend against ARV — typically 70–75% LTV based on after-repair value — which means they fund both the purchase and rehab in a single draw loan. Rates run 10–13%, plus 2–3 points, on 12–18 month terms. The high cost is the price of speed and flexibility — hard money closes in days, not weeks.

Phase 1 Alternatives

• Private money: A private lender lends at lower rates than hard money with more flexible terms. Best for investors who have built a track record.
• HELOC on existing property: If you own a home with equity, a HELOC can fund a BRRRR purchase cheaply. Rates track prime.
• Cash: The cheapest acquisition tool. Frees you from hard money carry costs during rehab.

Phase 2: Refinance into Long-Term Hold

DSCR loans are the preferred refinance vehicle for BRRRR investors. They do not verify personal income — they lend based on the property's debt service coverage ratio (rent income vs loan payment). At 70–75% LTV, a DSCR refinance can pull back most or all of your acquisition and rehab capital if you bought right. Rates run 1–2% above conventional, with 30-year terms available.

Seasoning Requirements

Most DSCR lenders require 6–12 months of seasoning after a purchase — meaning they use your purchase price in their LTV calculation for the first 6–12 months, not the appraised value. This is the most common surprise in BRRRR refinances. Find a lender with a 6-month or less seasoning period, or be prepared to wait 12 months before pulling capital out.

Dan White is a licensed Virginia real estate agent at Pearson Smith Realty and founder of FreeDealCalc.com. He has been investing in Northern Virginia real estate for 20+ years.