Buy, Rehab, Rent, Refinance, Repeat only works if the refinance works. This guide walks through how a DSCR (debt service coverage ratio) cash-out refinance fits the BRRRR plan, what a lender looks at, and where deals usually get stuck. DSCR loans are for investment properties only and are available nationwide.
What a DSCR refinance looks at
A DSCR loan qualifies mainly on the property's rent compared to its monthly housing payment (principal, interest, taxes, insurance and any HOA dues), instead of your tax returns or W-2s. That's why it fits investors who write off a lot of income or who are adding doors faster than their returns can show.
On a refinance, the lender typically looks at:
- ✓The new appraised value after your rehab, which sets how much you can borrow.
- ✓The rent from a signed lease and/or the appraiser's market rent estimate.
- ✓The DSCR that rent produces against the new payment. Each lender sets its own minimum.
- ✓Seasoning: how long you've owned the property. Many lenders have a minimum ownership period before they'll use the new appraised value instead of your purchase price plus rehab costs. Guidelines vary, so ask before you buy.
- ✓Your credit, reserves and track record, which can affect pricing and how much cash you can take out.
Five mistakes that stall a BRRRR refinance
- 1.Running the DSCR on the old payment. A cash-out loan is bigger, so the payment is bigger. Run the numbers on the new loan amount, not on what you owe today.
- 2.Guessing at insurance and taxes. Get a landlord insurance quote and check the county assessor before you commit to the refi. A higher premium can push a deal under the minimum DSCR.
- 3.No paper trail for the rehab. Keep receipts, a scope of work and before-and-after photos. They help the appraiser and they help you.
- 4.Refinancing before the property is rent-ready. An unfinished unit can come in at a lower value or a lower rent estimate.
- 5.Not talking to the refi lender at purchase. The best time to plan the refinance is before you close on the purchase, so the seasoning, the rehab budget and the rent all line up.
Before you call: a quick BRRRR refi checklist
- ✓Purchase settlement statement (closing disclosure) from the original purchase
- ✓Rehab budget, receipts and scope of work
- ✓Signed lease, or a realistic market-rent estimate for the area
- ✓Current landlord insurance quote and property tax amount
- ✓Entity documents if the property is held in an LLC
- ✓An idea of how much cash you want out and what it's for (your next deal?)
Please don't email tax returns, bank statements or your Social Security number. When you're ready, documents go through our secure application.
Run your DSCR first
Use our free DSCR calculator to see where your property lands, then start a conversation or book a call. We'll tell you plainly whether the refi pencils now or what needs to change.
FAQ
Can I do a DSCR refinance on a property outside Idaho?
Yes. DSCR loans for investment properties are available nationwide. Standard owner-occupied home loans are offered for Idaho properties only.
Can I use a DSCR loan on my primary residence?
No. DSCR loans are for non-owner-occupied investment properties.
Can the property be in an LLC?
Many DSCR programs allow vesting in an LLC. Ask us about the current requirements. Read the LLC guide.
Does a short-term rental count?
Some programs allow short-term rental income. How it's documented varies, so ask before you count on it. Read the short-term rental guide.
Nathan Jensen, NMLS #1692830 · Jensen Lending Team, Powered by Fulcrum Home Loans · Company NMLS #1926444 · Equal Housing Opportunity · 147 Main Ave E, Twin Falls, ID 83301 · (208) 405-5659
Equal Housing Opportunity. We are equal credit opportunity.
Credit approval is based upon borrower meeting all underwriting requirements for a qualified borrower. Terms and conditions are subject to change without notice. This is not a commitment to lend.
Jensen Lending Team is a DBA licensed in Idaho and powered by Fulcrum Home Loans. For Idaho regulatory information, contact the Idaho Department of Finance, Consumer Finance Bureau.