BRRRR with Multi-Family or SFR
Member since 2022 · 1 post · 7 votes
BRRRR with Multi-Family or SFR
Most Popular Reply
Stacy RaskinBusiness Member
Lender · Member since 2022 · 1k+ posts · 508 votesThere are options for hard money loans (HMLs) where you can get up to 90% of the purchase price and 100% of the rehab needed (done on draws). This will depend on the borrower's credit score and the property location. To get this process started a budget is needed for the rehab along with other details but the budget is a big factor. These funds can typically take anywhere from 7-14 business days or more to secure. Sometimes this can be shorter, it will depend on the property and the borrower.
Once the property is rehabbed you can convert the funding to long term financing with for an example a DSCR loan. A DSCR loan has a shorter seasoning or waiting period between the first transaction of the property and the cash out refinance to be able to use the new appraised value on the rehabbed property which allows the investor to get more of the invested cash back faster. This can be three months or less but generally three to six months will get an investor more cash out refinance program options with different lenders. It's helpful to work with a mortgage broker who specializes in these types of loans that are experienced as they will have more options for better programs. Fix and flip and DSCR loans aren't regulated like a conventional loan and rates and terms can be changed up until closing so working with a broker with a good reputation can help avoid that.
As far as how DSCR loans are structured: DSCR loans won't use your income to underwrite the loan. DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the best. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.
2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.
I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23
If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals. Happy to connect to discuss further.
Bright Skyline518 Reviews
15 Replies
- 7moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 508 votes
There are options for hard money loans (HMLs) where you can get up to 90% of the purchase price and 100% of the rehab needed (done on draws). This will depend on the borrower's credit score and the property location. To get this process started a budget is needed for the rehab along with other details but the budget is a big factor. These funds can typically take anywhere from 7-14 business days or more to secure. Sometimes this can be shorter, it will depend on the property and the borrower.
Once the property is rehabbed you can convert the funding to long term financing with for an example a DSCR loan. A DSCR loan has a shorter seasoning or waiting period between the first transaction of the property and the cash out refinance to be able to use the new appraised value on the rehabbed property which allows the investor to get more of the invested cash back faster. This can be three months or less but generally three to six months will get an investor more cash out refinance program options with different lenders. It's helpful to work with a mortgage broker who specializes in these types of loans that are experienced as they will have more options for better programs. Fix and flip and DSCR loans aren't regulated like a conventional loan and rates and terms can be changed up until closing so working with a broker with a good reputation can help avoid that.
As far as how DSCR loans are structured: DSCR loans won't use your income to underwrite the loan. DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the best. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.
I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals. Happy to connect to discuss further.
Bright Skyline518 Reviews - 7moArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 939 votes
Quote from @Kyle McAdams:
Hi BP community,
I'm a new-ish investor in the Sacramento, CA area and own a duplex (house hack/rental property).
I'm interested in doing it again soon, either with another duplex or a single-family rental, this time using the BRRRR strategy. I'd love advice on how to secure the loan for the initial purchase and rehab, and the overall process behind it—especially since my first deal was straightforward with W-2 income. Any tips on lenders, underwriting, hard money/dscr loans, or pitfalls to avoid in a high-cost area like the Sac area?
Happy to share more details via PM. Thanks in advance for any insights or recommendations!
Best, Kyle
@Kyle McAdams
Congrats on getting your first duplex under your belt! In a high-cost area like Sacramento, BRRRR can be tricky because your capital doesn't recycle as fast, and rehab/loan costs add up. A lot of investors in your situation pivot to Midwest markets where duplexes and small multis are well below replacement cost, cash flow is strong from day one, and refinancing is smoother. It's a great way to build a repeatable system without getting squeezed by high prices, and you can still do BRRRR while keeping your risk manageable. - 7moBradley BuxtonBusiness MemberReal Estate Agent · NV · Member since 2023 · 1k+ posts · 714 votes
Talk with a mortage broker. They can give you options from helocs, fix and flip loans, DSCR, refi, margin loans, and other products. They can also help you with timelines and holding cost calculations. I'll send you a PM with a couple of references. Buying in the right area will help, and a local agent in Sacramento will help with the areas with the best current and adding future value, which is important if you are going to use the BRRRR strategy.
- Member since 2026 · 97 posts · 57 votes7mo
Good question Kyle. Since you already own a duplex in Sac you have a baseline for how the numbers work there.
MF vs SFR for BRRRR comes down to your exit strategy and risk tolerance. With duplexes you get more rent per square foot of rehab usually and easier refi math since lenders look at actual rental income. SFRs in Sac can be tougher because the price points are high and rent-to-price ratios are lower so cash out refi doesnt always recover as much of your capital.
For the financing side in high cost areas like Sacramento the key is making sure your ARV estimate is conservative and your rehab budget has contingency built in. Hard money lenders will fund based on ARV but if your ARV is optimistic or rehab runs over you end up stuck refinancing at a loss or holding longer than planned. Run your numbers assuming 70-75% of ARV minus repairs to give yourself breathing room.
One thing I would add to what others said is to stress test the deal as an LTR before you commit. If it cash flows as a long term rental even at todays rates youre protected if refi doesnt go as planned. If it only works assuming you hit your refi target then the deal is riskier.
MF will generally be more forgiving in this scenario since you have more rental income to offset the loan. But SFR can work if you find the right off market deal at a steep enough discount.
Good luck with the search!
- 7moAlfath AhmedBusiness MemberReal Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
Quote from @Kyle McAdams:
Hi BP community,
I'm a new-ish investor in the Sacramento, CA area and own a duplex (house hack/rental property).
I'm interested in doing it again soon, either with another duplex or a single-family rental, this time using the BRRRR strategy. I'd love advice on how to secure the loan for the initial purchase and rehab, and the overall process behind it—especially since my first deal was straightforward with W-2 income. Any tips on lenders, underwriting, hard money/dscr loans, or pitfalls to avoid in a high-cost area like the Sac area?
Happy to share more details via PM. Thanks in advance for any insights or recommendations!
Best, Kyle
You should house-hack every year in the beginning stages of your investing career. Then you should look to transition into doing the brrrr method. You should look into the midwest to invest and grow your investments.
I personally buy in columbus. It is one of the best market to invest in for BRRRR/value add deals. I own 28 rental units that i acquired primarily using the BRRRR strategy.
I would look to connect with a good investor agent that can connect you with good contractors, hard-money lenders/DSCR lenders, and property managers that can lease and manage for you.
Your agent should be getting you off-market deals. Buy them at 75% ARV rule. They can also help guide you in building a Scope of Work to get a clear/better indicator of your rehab costs.
I have a map I built that I can share with you that highlights the best areas to invest. PM me and I'll share it with you.
ReafCo | Ahmed Group 536 Reviews - 7moRemington LymanBusiness MemberReal Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
Quote from @Kyle McAdams:
Hi BP community,
I'm a new-ish investor in the Sacramento, CA area and own a duplex (house hack/rental property).
I'm interested in doing it again soon, either with another duplex or a single-family rental, this time using the BRRRR strategy. I'd love advice on how to secure the loan for the initial purchase and rehab, and the overall process behind it—especially since my first deal was straightforward with W-2 income. Any tips on lenders, underwriting, hard money/dscr loans, or pitfalls to avoid in a high-cost area like the Sac area?
Happy to share more details via PM. Thanks in advance for any insights or recommendations!
Best, Kyle
You need to find a hard money lender. Typically they charge 1-3 points, 6-12 month terms, with 12-15% interest
- 7moMayo GilfurtPro MemberReal Estate Consultant · Connecticut Ct · Member since 2026 · 130 posts · 30 votes
Kyle, congrats on the duplex and the house hack — that’s usually how a lot of investors get their start.
For BRRRR deals in markets like Sacramento, most investors structure the initial acquisition and rehab with either short-term bridge financing or hard money, then refinance into a long-term DSCR rental loan once the property is stabilized.
The key things lenders usually look at are:
• Purchase price vs. after-repair value (ARV)
• Rehab budget and timeline
• Expected rental income after stabilization
• Exit strategy into a DSCR refinance
In higher-cost markets like Sacramento, the ARV and rent comps become especially important for the refinance stage.
If you want, feel free to PM me some of the numbers on the next deal you're considering. I work with several lenders that structure financing for BRRRR investors and I'd be happy to point you in the right direction.
- 7moMayo GilfurtPro MemberReal Estate Consultant · Connecticut Ct · Member since 2026 · 130 posts · 30 votes
Appreciate the support Kyle. A lot of investors don't realize DSCR can also transition into bridge financing if the property needs stabilization. If anyone here is working a BRRRR deal and running into financing issues, feel free to share the scenario.
- 7moSam TatoPro MemberInvestor · Buffalo, NY · Member since 2026 · 42 posts · 19 votes
If you're open to house hacking again you might be able to just get traditional financing in the form of a 203k loan. O my first house hack I had a 5% down conventional, then bought and moved into the duplex nextdoor with a 3.5% fha. It took some effort to get approved, most of the loan officers told me it wasn't a possibility. Ended up using the argument that the new one had slightly more square footage and one more bedroom so it was an "improvement" on my living standards. Something to look into!
- Investor · Austin, TX · Member since 2021 · 497 posts · 127 votes7mo
Hey Kyle,
Welcome to the world of real estate investing! It sounds like you're ready to take the next step after your first house hack. Doing BRRRR in a higher-cost market like Sacramento can definitely be a bit tricky, but it's totally doable.
A few thoughts:
If your W-2 income is strong, you might be able to go with conventional renovation loans like HomeStyle or FHA 203k. For BRRRR deals, a lot of people use DSCR loans or hard money. Hard money is faster but more expensive, and DSCR loans look more at the property's income than your personal income.
Things like appraisals, rehab costs, and timelines can sneak up on you. Always budget a little extra for surprises—trust me, something always pops up.
Focus on deals where the post-rehab rent comfortably covers your mortgage and rehab loan. In a competitive market, it’s easy to overpay, so be patient and stick to deals that make sense financially.
There are tons of BP members in CA who've done BRRRR and can point you toward lenders or share tips. Don't be shy about reaching out for advice or mentorship.
Happy to chat more if you want to dig into numbers or lender options.
- Investor · Tampa, FL · Member since 2026 · 24 posts · 18 votes7mo
@Kyle McAdams good position to be in with the duplex already done.
I'm 8 properties deep all SFH split between Tampa and Ocala. Two of those were BRRRRs, rest were conventional buy and hold. Currently looking at small multifamily in the 4-8 unit range for exactly the reason your wrestling with. Scaling SFH one at a time gets slow and the per unit managment overhead is a killer. With 8 scattered houses across two markets I've got 8 roofs, 8 HVAC systems, 8 separate insurance policies. A fourplex consolidates a lot of that and the per door acquisition cost is usually lower too.
For BRRRR specifically small MF is actually easier to underwrite on the refi because DSCR lenders care about aggregate rent not per unit. A quad throwing off $4,800/mo in rent is alot easier to refi than a single unit at $1,200. You also have built in vacancy protection, one vacancy in a quad is a 25% hit vs 100% in a SFH.
In Sacramento your price points are high so I'd look hard at what @Kevin Sobilo said about finding severely distressed stuff where the spread makes the math work. On financing I've used DSCR loans for my last three and the process is pretty straightforward once you have 6+ months seasoning post rehab. Rates are 7.5-8% right now which isnt great but the qualification is entirely on the property not your DTI. Useful once you're past 3-4 conventional loans.
- 4moDenise WebsterBusiness MemberFinancial Advisor · Albuquerque, NM · Member since 2014 · 82 posts · 30 votes
Great question Kyle, especially in a higher-cost market like Sacramento where the numbers can tighten quickly.
@Stacy Raskin gave a strong breakdown of the hard money-to-DSCR path, and I'd especially echo the points about rehab budget, draw structure, DSCR seasoning, credit score, LTV, and reserves. Those are usually the items that determine whether a BRRRR plan is actually lender-ready, not just theoretically possible.
The way I would think about this is in two phases:
First, the acquisition/rehab phase. Hard money or private money may work well here, but make sure you understand whether rehab funds are advanced or reimbursed through draws. If the lender reimburses after completed work, you still need enough liquidity to float labor, materials, utilities, insurance, taxes, and delays between draw releases.
Second, the refinance exit. DSCR can be a very useful exit because it focuses more on property income than personal W-2 income, but it is not automatic. The final loan amount will still depend on rent support, appraisal, credit, LTV, reserves, property condition, and lender-specific seasoning rules.
For Sacramento specifically, I’d be conservative on:
- ARV
- Market rent
- Rehab contingency
- Holding period
- Property taxes and insurance
- Refinance rate assumptions
- Cash left in the deal after refi
One pitfall I see often is investors focusing only on whether they can buy the property, when the bigger question is whether the completed property can support the refinance. A BRRRR that requires perfect rent, perfect appraisal, fast rehab, and best-case loan terms can become stressful fast.
Before submitting to lenders, I’d package the deal cleanly:
- Purchase price
- Rehab scope and budget
- Contractor bid
- Estimated timeline
- Rent comps
- Sales comps
- Before/after value support
- Entity documents
- Credit profile
- Liquidity/reserves
- Exit refinance assumptions
That gives you a much better chance of getting useful lender feedback early, before you are under contract and racing the clock.
- 4moRobert EllisBusiness MemberDeveloper · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
Quote from @Kyle McAdams:
Hi BP community,
I'm a new-ish investor in the Sacramento, CA area and own a duplex (house hack/rental property).
I'm interested in doing it again soon, either with another duplex or a single-family rental, this time using the BRRRR strategy. I'd love advice on how to secure the loan for the initial purchase and rehab, and the overall process behind it—especially since my first deal was straightforward with W-2 income. Any tips on lenders, underwriting, hard money/dscr loans, or pitfalls to avoid in a high-cost area like the Sac area?
Happy to share more details via PM. Thanks in advance for any insights or recommendations!
Best, Kyle
If I were in your position, I'd focus less on whether the next deal is a duplex or a single-family rental and more on which asset type gives you the most margin for error on the refinance. In a market like Sacramento, that's often the real challenge with BRRRR.
What matters most here is the relationship between acquisition cost, rehab budget, stabilized rent, and refinance value. The mistake I see investors make is getting excited about the purchase and rehab while assuming the refinance will work exactly as planned. In reality, the refinance is what determines whether you successfully recycle capital or end up leaving more cash in the deal than expected. Multifamily properties can sometimes be more forgiving because multiple income streams help offset vacancies and support the loan, while single-family homes often rely more heavily on appreciation and tighter rent-to-price ratios.
Before moving forward, I'd ask yourself one question: if the refinance came in 10% lower than expected, which property type would you still be comfortable owning long term?
Section 8 Launch52 Reviews - 3moGordon CuffePro MemberInvestor · Roseville, CA · Member since 2009 · 1k+ posts · 583 votes
@Kyle McAdams I am a mortgage broker in Sacramento. You can use a one year 10% down payment plus 100% of the rehab financing loan. Once the property has been remodeled and a tenant placed, you can refinance after 6 months using the new property value with a DSCR type of loan. The lender will use the rents to qualify you for the new mortgage. You can always dm any questions. The tough part is finding a property at a good enough price so that you have the equity to refinance. Most lenders want you to be at 75% ltv some will refi at a higher ltv it just means the rate is slightly higher.
- 1wErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Hey Kyle,
As other stated, a fix and flip loan will likely be the best way to go to finance a distressed, non-owner occupied property.
I would recommend running your numbers very conservatively. CA is a very mixed market in general, and the value for 1-4 unit residential is highly dependent on housing affordability in the area and market activity.
Most HMLs will require that you have some sort of experience if the rehab is intensive. If you are looking at a light rehab, there are many CA Hard Money programs that lend up to 90% of the purchase price and 100% of the rehab with no experience needed as long as you have a high FICO (720-740).
The Rehab funds are usually a hold back so you would be required to complete the rehab and request draws. Make sure you have a solid GC agreement for payouts and have some cash set aside.
Leverage is usually capped on the experience and ARV. Usually (70-75% of the ARV is the cap for most HMLS)
Hope this helps
LuxePrivate Investments LLC 572 Reviews
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