The BRRRR strategy lives or dies on financing. Buy, Rehab, Rent, Refinance, Repeat only recycles your capital if the loan on the front end is built for a property that needs work — and a conventional mortgage isn't. That's why nearly every serious BRRRR investor runs the first two stages on a hard money loan.
A BRRRR hard money loan funds the purchase and the renovation of a property that no traditional bank will touch. It closes fast, leverages off the deal rather than your tax returns, and releases rehab funds in draws as the work gets done. Then, once the property is renovated and leased, you refinance out of it into long-term financing and pull your cash back out — ready to do it again.
This guide walks through exactly how to structure a BRRRR deal around a hard money loan: how the acquisition-and-rehab financing works, what numbers have to line up, how the refinance exit returns your capital, and where deals go wrong. At Funded Capital, we finance both ends under one roof — the hard money loan up front and the DSCR refinance on the back — so the whole cycle runs with one lender.
Why Hard Money Is the Right Tool for BRRRR
The "B" and "R" in BRRRR — Buy and Rehab — describe a property in mid-distress: outdated, damaged, or simply unrentable as-is. Conventional and agency lenders underwrite the property's current condition and your personal income, and a property that needs $40,000 of work fails that test before you finish the application.
A hard money loan flips the logic. It underwrites the deal — the purchase price, the rehab scope, and the after-repair value (ARV) — not your W-2. That makes it the only financing that fits the front half of a BRRRR cycle.
Speed and Leverage
Two features make a BRRRR hard money loan worth the higher rate. The first is speed: Funded Capital issues term sheets in 2 hours and closes in as little as 5 days, which lets you compete with cash buyers on undervalued inventory. The second is leverage: with up to 90% loan-to-cost on a fix & flip loan, you bring far less cash to the acquisition, leaving more dry powder for the next deal. Both matter when the entire point of BRRRR is to keep your capital moving.
The BRRRR Hard Money Loan, Stage by Stage
Here's how the financing maps onto each stage of the cycle. The hard money loan carries the first two stages; the DSCR loan carries the exit.
| Stage | What Happens | Financing |
|---|---|---|
| Buy | Acquire below market, with a real spread to ARV | Hard money / fix & flip loan — from 8.75%, up to 90% LTC |
| Rehab | Renovate to force appreciation | Rehab budget released in draws |
| Rent | Stabilize with a paying tenant | — (lease in place) |
| Refinance | Pull capital out at the new value | DSCR loan — from 6.0%, up to 80% LTV |
| Repeat | Redeploy recovered cash | — |
The hard money loan is short-term by design — it's there to get the property bought, fixed, and leased, then it gets replaced. You are never meant to hold it long. Its job is to bridge the gap between a distressed property and a refinanceable one.
Step 1: Underwrite the Deal Before You Borrow
The BRRRR hard money loan only works if the deal supports it. Before you make an offer, confirm the property has enough spread between your all-in cost and its stabilized value to refinance cleanly later.
The 75% Rule
Keep your all-in cost — purchase plus rehab — at or below 75% of ARV. Most refinance programs cap around 75–80% LTV, so if you go in at 75% all-in and refinance at 75% of the new value, your invested cash comes back out. Here's the math on a typical deal:
| Line Item | Amount |
|---|---|
| After-Repair Value (ARV) | $320,000 |
| Purchase price | $195,000 |
| Rehab budget | $45,000 |
| All-in cost | $240,000 (75% of ARV) |
| Hard money loan at 90% LTC | ~$216,000 |
| Cash invested at closing | ~$24,000 + reserves |
| DSCR refinance at 75% LTV | $240,000 |
| Capital recovered | ~Full investment |
A high or sloppy ARV is the single most common reason a BRRRR deal fails to refinance, so nail that top-line number first. Our guide on how to calculate ARV walks through the comp selection that holds up at appraisal. Then run your specific scenario through the loan calculator before you commit.
Step 2: Close and Draw the Rehab
Once the deal underwrites, the hard money loan funds the purchase and sets aside the rehab budget. That rehab money isn't handed over at closing — it's held back and released in draws as you complete stages of work, with each draw inspected before it funds.
This draw structure protects both sides: you're not paying interest on the full rehab budget before you've spent it, and the lender confirms the value is actually being built. Keep your scope tight, your contractor on schedule, and your draw requests clean, because every extra week on a hard money loan is interest you'll want to refinance away from quickly.
Investors building a portfolio often hold each property in a separate LLC to keep liability and financing clean as deals stack up. Setting that up before you close keeps the refinance simple.
Step 3: Rent, Then Refinance Out
A property can't move into a DSCR refinance until it produces income, so lease it up fast once the rehab wraps. The signed lease starts your cash flow and establishes the rent the refinance underwriter will use. Price it at market — overreaching leaves it vacant and delays the exit; underpricing weakens the coverage ratio.
The DSCR Refinance Exit
The natural exit from a BRRRR hard money loan is a DSCR loan, because it qualifies on the property's rent — not your personal income. No tax returns, no W-2s, no debt-to-income test. The lender checks that the rent covers the new payment, then funds based on the renovated appraised value.
Funded Capital's DSCR loans start at 6.0% with up to 80% LTV, calculated against the new, higher ARV — which is exactly what returns your capital. For the mechanics the refinance underwriter will check, see how to calculate DSCR and our DSCR loan requirements breakdown. With the hard money loan paid off, a tenant in place, and your cash recovered, you redeploy into the next deal — the "Repeat" in BRRRR.
Common Mistakes Financing BRRRR with Hard Money
The structure is simple to describe and easy to get wrong. The deals that stall almost always trace back to one of these:
- Inflated ARV. An optimistic value inflates your budget and collapses at the refinance appraisal. Use conservative comps.
- Thin rehab budget. Overruns push your all-in above 75% of ARV and trap capital. Pad the scope and confirm it before closing.
- Weak DSCR. If stabilized rent barely covers the new payment, refinance leverage drops and less cash comes out. Check the ratio before you buy.
- Refinancing too early. Most lenders apply a seasoning period before lending against the new value. Confirm the timeline up front.
- Two-lender friction. Lining up the hard money loan and the DSCR refinance with separate lenders adds cost and delay. One lender across both ends keeps the cycle tight.
Ready to Get Funded?
Funded Capital is a Miami-based private lender serving real estate investors in 44 states — and we finance both ends of a BRRRR deal under one roof. Use a fix & flip loan from 8.75% with up to 90% LTC to buy and renovate, then refinance into a DSCR loan from 6.0% with up to 80% LTV once the property is leased and stabilized.
We issue term sheets in 2 hours and close in as little as 5 days, with no income verification on most programs. When you're recycling capital across deals, that speed is the difference between two BRRRR cycles a year and four.
Or call us directly: (305) 857-5620 | processing@fundedcapital.com
Running BRRRR deals for clients? Our broker program keeps both the acquisition and refinance fast and predictable. New to the process? Start with how it works or the full BRRRR strategy guide.
Frequently Asked Questions
Can you use a hard money loan for BRRRR?
Yes — a hard money loan is the standard way to finance the first two stages of a BRRRR deal. It funds both the purchase and the renovation of a property that conventional lenders won't touch, closes in days rather than weeks, and releases the rehab budget in draws as work is completed. Once the property is renovated and leased, you refinance out of the hard money loan into a long-term DSCR loan and recover your invested capital.
Why not just use a conventional loan for BRRRR?
Conventional and agency lenders underwrite a property's current condition and your personal income. A property that needs significant work fails that test, and the closing timeline is too slow to compete for undervalued inventory. A BRRRR hard money loan underwrites the deal itself — purchase price, rehab scope, and after-repair value — which is why it fits the front half of the cycle and a conventional mortgage doesn't.
How much cash do you need for a BRRRR hard money loan?
With a fix & flip loan covering up to 90% of loan-to-cost, you bring far less than a conventional 20–25% down payment — typically the remaining 10% of costs plus rehab reserves, closing costs, and holding costs. Because the DSCR refinance returns most or all of your invested capital, the same starting funds can carry you through deal after deal. Model your numbers with our calculator.
How do you refinance out of a hard money loan in BRRRR?
You refinance into a DSCR loan, which qualifies on the property's rental income rather than your personal income — no tax returns or W-2s required. Once the property is renovated and leased, the lender underwrites the stabilized rent against the new payment and funds based on the renovated appraised value. Funded Capital's DSCR loans start at 6.0% with up to 80% LTV, calculated against the higher post-rehab value, which is what returns your capital.
What rate should you expect on a BRRRR hard money loan?
Hard money rates run higher than long-term financing because the loan is short-term and built for distressed property. Funded Capital's fix & flip loans start at 8.75% with up to 90% LTC. The higher rate is acceptable in BRRRR because you only hold the loan through the buy, rehab, and lease-up — usually a matter of months — before refinancing into a DSCR loan from 6.0%. The hard money loan is a bridge, not a destination.