The BRRRR method of real estate investing is all about repeatability and speed. You execute a similar strategy for each deal, and execute it as quickly as possible to build a portfolio faster than your capital reserves would otherwise allow.
Too many investors limit the scope of their financing to the traditional mortgage. This is a shame, because so many creative options are out there — mature options that have stood the test of time and viability.
Munoz Ghezlan Capital specializes in helping BRRRR investors think outside the box in the direction of creative financing options off the beaten path of the traditional mortgage. In this article, we will discuss BRRRR financing options available to investors to execute the strategy faster, larger, better.
Key Takeaways
- While they have a low cost of borrowing, traditional mortgages are slow, based on personal income, and limited in the number you can take out, making them imperfect vehicles for BRRRR financing.
- BRRRR financing alternatives include DSCR loans (mortgages based on income potential), bridge loans (short-term acquisition and rehab loans), private money loans, seller financing, and unsecured business working capital loans.
- BRRRR investors using short-term acquisition or working capital loans must have a clear exit strategy for the shorter-term or higher-cost debt.
What BRRRR Investors Need From Financing in 2026
To understand what BRRRR financing options in 2026, let’s briefly recap what the BRRRR strategy entails, why traditional mortgages fall short, and extrapolate what a better option might look like so we know it when we see it.
BRRRR: A Quick Refresher
The “BRRRR” acronym stands for:
- Buy – acquire the property below market value.
- Rehab – renovate or remodel the property to achieve market value.
- Rent – lease the property to a long-term tenant or short-term guests (i.e. Airbnb).
- Refinance – obtain long-term financing via a cash-out refi based on the newly-attained market value, retiring the acquisition debt with cash to spare.
- Repeat – use that extra cash from the refi as down payment for the next property.
Without this strategy, it might take years of earned income or positive cash flow for a real estate investor to acquire enough money for the down payment on the next property. The BRRRR strategy is based on producing enough equity through real estate entrepreneurship to acquire the next property quickly.
Based on the mechanism of this strategy, we can deduce several characteristics of effective BRRRR loan alternatives:
- Speed. The whole point of BRRRR financing is to work quickly.
- Property-Based. As an investment strategy, BRRRR financing should be based on the investment potential of the property.
- Hybrid Short-Term/Long-Term. The BRRRR strategy revolves around two phases of financing — first, acquisition and rehab; second, long-term refinance.
Why Traditional Mortgages Don’t Cut It
The traditional “QM” (qualifying mortgage) source of real estate financing is the only one many people know about, and is often assumed to be the only one that exists. This is a stumbling block for many BRRRR investors due to the many characteristics of traditional mortgages that make it a less-than-ideal financing vehicle for the strategy:
- Slow. Traditional mortgages come with many speedbumps. The underwriting process is notoriously slow compared to other financing vehicles, with time frames of a month or more. That isn’t the only speedbump either — the BRRRR strategy depends on refinancing, and traditional mortgages usually require six months to a year to elapse before the borrower is even eligible for refinance. For BRRRR investors who want to quickly grow their portfolios, this is a major bottleneck. Traditional mortgages also require long seasoning periods for acquisition funds, slowing the investor down even further.
- Based On Personal Income. As a long-term investment strategy, it would make sense for financing to be predicated on the income potential of the investment. However, due to Federal laws, traditional mortgages steadfastly ignore the viability of the investment, constrained to considering nothing more than the personal income of the investor. For investors with little consistent income — including high-income career real estate investors — it can be hard to even qualify for a traditional mortgage due to the unconventional nature of their income.
- No Rehab Financing. Another key “R” in the strategy is rehab. Traditional mortgages can be decent sources of 80-85% of the purchase price, but no traditional mortgage will allocate funds for the renovation. If the investor does not want to commit capital to the renovation (or has no capital to commit), (s)he will need a different source of financing than a traditional mortgage.
- Limited Number of Loans. The BRRRR strategy is all about scalability — acquiring a portfolio of rental properties quickly, and as many of them as possible. Properly executed, each new property is a new source of cash flow and equity buildup. However, traditional lenders are notorious for cutting off investors after they obtain a certain number of loans.
Overview: The 2026 BRRRR Financing Landscape
For all of the above reasons, traditional mortgages are no longer the default financing solution for BRRRR financing. DSCR loans have moved to the forefront as the go-to debt vehicle for this strategy due to its faster and property-based underwriting. Moreover, business credit is increasingly taking a supplementary role in providing working capital for renovations and operations — or even for down payments to make the scaling process go even faster.
DSCR Loans for BRRRR Investors
What DSCR Loans Are (Brief refresher)
“DSCR” in DSCR loan stands for “debt service coverage ratio,” a metric that calculates the ability of property income to satisfy the debt service. The equation is:
DSCR = Annual Net Operating Income (NOI) ÷ Annual Debt Service
For properties with enough NOI to cover the debt service, this equation will produce a result equal to or greater than 1. That’s what most DSCR lenders want to see — a result of 1 or greater, indicating that the property, if properly managed, will produce enough income to pay the mortgage, possibly with cash flow to spare.
The key point to understand about a DSCR loan is that it is based on the income potential of the property, not the employment income of the borrower. Even for investment properties, traditional mortgages are required by law to consider only the borrower’s personal income and debt-to-income ratio, represented by pay stubs, W-2s, personal tax returns, and personal debt.
DSCR loans, on the other hand, often don’t even require the borrower to submit paystubs, W-2s, or personal tax returns. Instead, the lender looks at the income potential of the property, represented either by Form 1007 – income potential – on the appraisal, or aggregated data on short-term rental potential from sources like AirDNA.
DSCR loans usually have higher interest rates, origination points, and down payments than traditional mortgages. However, they don’t cap the number of loans to one borrower, making them more effective for scaling a portfolio.
Why DSCR Works Well for BRRRR
- Based on the income of the property rather than personal income, aligning with the long-term rental strategy of BRRRR.
- Fast underwriting, appropriate for the speed necessary for an effective BRRRR strategy.
- Short refinancing timeline (1-3 months instead of 6-12 months for traditional mortgages), meaning you can execute the third “R” — refinance — more quickly.
- No limitation on the number of loans you can take out, making it a more effective vehicle for scaling your portfolio of rentals.
- Flexible in property usage, including Airbnbs and short-term rentals.
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DSCR for BRRRR Specifically
A DSCR can serve one or two purposes among BRRRR financing options:
1. Acquisition Financing
A DSCR loan can be used to acquire the property in the first place, financing 70-80% of the purchase price. Since effective DSCR investors acquire property at below-market prices, the DSCR minimum is often easier to attain.
Sometimes a hard money loan, bridge loan, or working capital loan is more appropriate for acquisition expenses, but fast-funding DSCR loans can be used for this purpose as well.
2. Refinance
A DSCR loan can also be used as a long-term cash-out refinancing loan for the third “R” in the strategy.
If the borrower has the time and the personal income to clear underwriting for a traditional mortgage, the traditional mortgage may be a better choice due to its lower cost-of-borrowing and higher LTV maximums. But if the rehab goes quickly enough to justify a fast refinance, or if the borrower already has too many traditional mortgages, DSCR for BRRRR refinance can keep the scaling strategy moving at a brisk pace.
Limitations To Be Honest About
- DSCR loans do not include rehab expenses. If the investor needs financing for the renovation or repair stage of BRRRR, it won’t come from a DSCR loan. DSCR lenders will only lend 70-80% of the contractual purchase price, with no extra funding for rehab.
- Higher Cost of Borrowing. DSCR loans usually carry 1-2% extra APR and 1-2 extra origination points compared to traditional loans.
- Prepayment Penalties May Apply. Some DSCR loans will charge you extra penalty fees if you refinance too soon, which can be a sticking point for investors who want to scale quickly using the BRRRR strategy.
When DSCR for BRRRR Is the Right Choice
Despite the limitations, a DSCR loan is probably the right choice of BRRRR financing options if:
- The borrower intends to hold the property long-term.
- The priority is portfolio growth and scaling.
- The borrower wants a predictable underwriting model instead of the lowest possible price.
- The borrower already has too many loans.
- The borrower is a business owner, gig worker, entrepreneur, self-employed individual, or career real estate investor, with an income structure that makes it hard to fit into the box of a traditional loan.
Bridge Loans as Core BRRRR Loan Alternatives
What Bridge Loans Are
Bridge loans are short-term, asset-based loans. With terms ranging from 6 to 24 months, they are intended for acquisition and rehab. They close quickly and often include a rehab budget in the loan balance.
Why Bridge Loans Fit BRRRR,
- Fast closing, ideal for BRRRR investors who want to scale quickly.
- Covers the “B” and the first “R,” including both acquisition and rehab financing.
- Based on ARV (after-repair value), not the borrower’s personal income or debt-to-income ratio.
- No seasoning requirements for down payment, making it easier to use business credit to create a 0%-down deal.
- No time limit on refinance, meaning the borrower can refinance as soon as the rehab is complete.
- No prepayment penalties, since the debt is designed to be retired within a relatively short period of time with the refinance or fix-and-flip proceeds.
Common Bridge Loan Structures
- Purchase + Rehab Bundled. Some bridge loans offer both the purchase price and rehab budget upfront — ideal for fast rehabs.
- Draw Schedules for Renovations. Other bridge loans require you to draw the rehab budget over time after project milestones. You will be required to submit contractor invoices and proof-of-work before the funds will be disbursed, often to pay the contractor directly. This is to reduce the lender’s risk by making sure that the project is on track as expected, but it may undermine the investor’s ability to achieve better prices and priority scheduling by paying contractors in advance.
- Interest-Only Payment Terms. This helps manage expenses during the renovation period, when the property is producing no rent income and incurring significant rehab expenses. Since no principal is paid down, the debt will have to be retired by payment of principal in full through the refinance proceeds.
Risks and Tradeoffs
- Higher Interest Rates – bridge loans have higher APRs than either traditional or DSCR loans.
- Higher Fees – bridge loans usually carry higher fees than traditional or bridge loans.
- Requires a Clear Exit – if the borrower can’t sell or refinance before the term of the loan expires, (s)he may face balloon payments and extension penalties.
Best Practices for BRRRR Loan Alternatives
- Get Prequalified for a DSCR Loan Before Obtaining Bridge Financing. This will give you confidence in the refinance exit strategy for the short-term debt.
- Be Conservative with ARV Assumptions. Don’t base your strategy on the best-case scenario for ARV – if possible, use the worst-case scenario so you aren’t caught flat-footed with short-term debt you can’t retire in full.
- Keep Rehab Timelines Tight. Give yourself as little time as possible servicing that high-interest debt, and as much time as possible to execute the exit strategy before the debt term expires.
Private Money Lending for BRRRR
What Private Money Is
A private money loan is a loan from an individual, family, group, or private entity, not an institution that is in the business of making loans. Family offices often issue private loans, as do individuals with self-directed IRAs or solo 401(k)s as part of their retirement strategy.
Private money loans depend not on dispassionate underwriting but on relationships. Smart private money lenders underwrite their deals, but there are no institutional policies or Federal guidelines they have to adhere to. If they believe in the investor, they are at their liberty to lend to them.
Private money real estate loans usually follow the same structure as any mortgage — a deed of trust and a promissory note, with the property acting as collateral for the loan. This is the same as a traditional mortgage, DSCR loan, hard money loan, or bridge loan, and it is perfectly legal for a private money loan.
Why Investors Use Private Money
Investors use private money loans because there are essentially no hard-and-fast rules, other than the terms the borrower and the lender agree to. Income documentation — either for the borrower or the property — may not be necessary. This allows for fast funding and flexibility. Loan terms can often be renegotiated, especially if the private lender values the relationship with the borrower.
Where Private Money Fits in BRRRR
- Acquisition Funding. The lender may extend a short-term loan to take the place of a bridge loan and help the investor acquire the property in the first place, often at favorable repayment rates.
- Gap Funding. The investor may secure a private money loan to cover gaps in financing, whether it be the down payment, rehab costs, or other startup costs.
- Refinance. If institutional long-term financing cannot be secured, a private money lender may agree to a long-term loan to retire short-term acquisition debt, at least until long-term financing can be acquired.
Risks and Guardrails
- Relationship Risk. If the deal encounters difficulty, the relationship between the borrower and the lender may be strained or even severed — a difficult position if the lender is a friend or family member. Emotional relationships may also lead either party to make emotional decisions.
- Need Clear Documentation. While “handshake loans” are technically legal, they put both the borrower and lender at risk in the event of conflicts. The parties should make the effort to paper the deal properly with the help of attorneys.
- Must Comply with State Lending Laws. States often put certain restrictions on private lending, again necessitating a consultation with a lawyer.
Working Capital and Business Credit for BRRRR
What “Working Capital for BRRRR” Really Means
A business working capital loan is a kind of business loan, often unsecured, available to established businesses based on their revenue history. They are usually term loans (2-7 years, though longer and shorter terms are out there), with higher interest rates than mortgage loans secured by collateralized real estate.
“Working capital for BRRRR” means an established real estate investor or investment company to cover a variety of expenses. This can include:
- Rehab expenses like materials and contractor fees.
- Operating expenses like insurance, utilities, and marketing.
- Setup expenses, like furnishing or decorating an Airbnb.
- Acquisition expenses like down payment, earnest money, and closing costs (if the mortgage lender is amenable).
With little or no revenue history, a working capital loan may not be a viable solution for a first-time investor, but after a few years and a few successful deals, they may help investors dramatically accelerate their portfolio scaling. Munoz Ghezlan Capital has even helped investors secure up to $500,000 in unsecured working capital debt early in their investing careers.
What It Is (and Is Not)
- Working capital for BRRRR is not a replacement for a mortgage. The shorter terms, higher interest rates, and principal-and-interest payments on term loans make them inappropriate as full acquisition financing.
- Working capital for BRRRR is not “down payment assistance.” Some DSCR lenders will agree to let you use a working capital loan as down payment, but they will require that you disclose the source of funds and add service on the working capital debt to the DSCR calculation.
- Working capital for BRRRR is a good potential source of operational funding, liquidity, and rehab financing.
Smart Uses in BRRRR
- Rehab costs not covered by a traditional or DSCR mortgage.
- Carrying costs during renovation like insurance, utilities, and property taxes, especially since the property generates no rent during rehab.
- Appraisal and inspection overruns to keep the deal on track.
- Emergency reserves to preserve liquidity in case of unexpected expenses.
- Down payment on acquisition, only if the lender approves (DSCR lenders might, traditional lenders never will due to regulations), as a short-term financing solution to be retired by the long-term refinance.
Seller Financing and Hybrid Structures
What Seller Financing Is
Seller financing is a strategy where the seller of the property acts as lender. Instead of requiring cash upon closing, the seller substitutes a note in the amount of some or all of the purchase price. If the seller has outstanding debt against the property, there must be enough cash to retire that debt unless the seller agrees to “subject-to” financing. Normally, this only happens when the seller owns the property free-and-clear instead or has substantial equity.
As with private money lending, the seller has substantial latitude with the terms (s)he offers and may agree to very generous terms. Sellers usually agree to this when they prioritize passive cash flow over lump-sum payments, or they want to avoid hefty capital gains taxes.
Why It Works for BRRRR
- Fast – no delays for bank or institutional underwriting.
- Flexible – terms can be whatever the buyer and seller agree upon.
- Low Upfront Cash – the seller can even agree to 100% financing if desired.
Hybrid Structures
Hybrid structures blend seller financing with other types of financing. For example, the buyer might secure a DSCR loan and the seller carries the down payment amount as seller financing. This only works with the approval of the DSCR lender — this technically counts as “borrowed funds,” which traditional mortgage lenders and some DSCR lenders don’t allow for down payments. Munoz Ghezlan Capital keeps track of the ones that do.
The seller financing could also act as acquisition financing to be refinanced later with a traditional or DSCR loan. The buyer might also secure a working capital loan for rehab on the seller-financed deal.
Risks and Considerations
- Clear Exit Strategy Needed. Many sellers will not agree to an open-ended long-term loan. They want their own exit at some point. Many seller-financing deals include balloon payments after a limited number of years, requiring the investor to think about the exit strategy early, just like with a bridge loan.
- Proper Legal Documentation Needed. As with private-money loans, successful seller financing requires proper paperwork to make it legal, prepared by an attorney.
Bottom Line
The traditional mortgage is far from the only financing option available for the BRRRR strategy. In many cases, it’s not even the best one, at least not on its own. DSCR loans, bridge loans, business working capital loans, seller financing, and private money loans offer diverse BRRRR financing options to meet the needs of investors at every stage of the deal.
Successful BRRRR investors rarely depend on only one kind of loan. Each financing product is another tool in the investor’s toolbelt, and smart investors fit the right tool to the right job.
Munoz Ghezlan Capital has helped hundreds of BRRRR investors identify the best creative financing strategy for the deal in front of them, and strategize for every deal that comes after. If you want to scale your rental portfolio quickly, book a complimentary strategy call with a Munoz Ghezlan BRRRR specialist. We can help you identify the best BRRRR financing options to build your empire without delay.
