BRRRR: refinancing a hard money rehab into a conventional or DSCR loan

BRRRR — buy, rehab, rent, refinance, repeat — turns a hard money purchase into a long-term rental by refinancing the short loan into a permanent one, ideally pulling most of your cash back out. The fourth R is where the plan meets the underwriting rules.

The refinance that makes it work

After the rehab and a tenant in place, you refinance into a 30-year loan based on the new appraised value, not your cost. If you bought for $150,000, spent $40,000, and the property appraises at $260,000, a 75% LTV refinance yields $195,000 — enough to repay the hard money loan and return most of your $190,000 all-in. The cash comes back, the property stays, and the next deal starts.

Conventional rules

Seasoning: Fannie Mae and Freddie Mac generally require you to have owned the property for six months before a cash-out refinance at the appraised value (the “delayed financing” exception lets you refinance sooner up to your documented purchase and rehab cost if you bought with cash or hard money under specific conditions).
LTV: 75% for a one-unit investment cash-out, 70% for two-to-four units.
Qualification: your personal income and DTI, with 75% of the lease counted; six months of reserves; a 620+ score with pricing that rewards 740+.
Property count: up to ten financed properties, harder after four.

DSCR as the exit

When your DTI is full or you hold title in an LLC, a DSCR loan qualifies on the property’s rent instead: typically 75% LTV, a 1.0–1.25 coverage ratio, no income documentation, a higher rate and a prepayment penalty. Many DSCR lenders have shorter or no seasoning requirements, which matters when the hard money clock is running.

Where BRRRR breaks

The appraisal: a value 10% below your projection can leave $20,000 to $30,000 stuck in the deal — or worse, not enough to repay the hard money loan. Underwrite the ARV conservatively.
Seasoning vs loan term: a 9-month hard money loan and a 6-month seasoning rule leave little room for a slow rehab or a slow refinance.
Rates: the permanent loan’s payment must fit the rent with margin; rising rates between purchase and refinance shrink the cash-out.
Vacancy: lenders want a signed lease or market rent support; an unrented unit delays or reduces the loan.

Frequently asked questions

Can I refinance before six months?

Conventional: a rate-and-term refinance (no cash out) has no seasoning requirement but is capped at the cost basis in practice; delayed financing allows cash-out up to documented cost. Many DSCR and portfolio lenders allow cash-out at appraised value after three months or less.

Does the refinance pay off the hard money loan automatically?

Yes — the new lender pays the old one from the loan proceeds at closing, the same as any refinance. Confirm the hard money payoff includes any minimum-interest or exit fees.

Is it realistic to pull 100% of my cash out?

Occasionally, on an exceptional deal. A more realistic target is 70% to 90% of cash returned; leaving some equity in the property also makes the rental cash-flow safer.