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The BRRRR method of real estate investing continues to be one of the most-used strategies in 2023. With interest rates elevated yet property values remaining resilient, finding cash flow with a reasonable down payment is an incredible challenge.
However, the BRRRR strategy (buy, rehab, rent, refinance, repeat) makes sense for a lot of investors, as value can be created through forced appreciation (renovations) and capital recycled through cash-out refinances. With rates high and competition fierce, nailing the financing piece of the BRRRR method has never been more important.
This article will explore the loan options facing BRRRR strategy investors, with a focus on the all-important third R: refinance. Specifically, we’ll compare DSCR refinance loans to traditional options, namely bank or conventional loans.
The Evolution of Options
With the publication of Buy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Property Investment Strategy Made Simple by David Greene in 2019, the BRRRR method was publicized to real estate investors, and real estate investing was never the same. In the book, each step of the BRRRR method is meticulously explained, and it’s jam-packed with advice, tips, and information, including two chapters all about the crucial refinance portion of the process.
In the book, Greene details all the different options for refinancing, along with the pros, cons, and details of each. However, DSCR loans are not mentioned.
Why? While DSCR loans existed back in 2019, the product was just getting started and not widely developed or available. A lot can change in just four years (as everyone on the planet who lived through 2019-2023 knows).
Five years ago, BRRRR method investors were generally limited to conventional loans (under government-sponsored enterprise, or GSE, rules and limits), bank portfolio…