DSCR Direct

BRRRR - Buy, Rehab, Rent, Refinance, Repeat - is the strategy that lets investors scale a rental portfolio without needing fresh capital for every deal. The refinance step is where the DSCR loan comes in, and it's the most critical piece of the puzzle. If the refi doesn't pull out enough cash, the whole strategy stalls. This case study walks through a duplex BRRRR where the investor got back virtually every dollar they put in.

The Acquisition

The investor found a distressed duplex in a B-class neighborhood in Kansas City listed at $180,000. Both units were vacant and needed significant work - outdated kitchens, damaged flooring, one unit needed a full bathroom gut. She purchased with a hard money loan at 85% LTV ($153,000 loan) at 12% interest, interest-only, with a 12-month term. Her out-of-pocket for the purchase was $27,000 down payment plus $4,500 in closing costs.

The Rehab

Total rehab budget was $60,000, which she funded from savings. The scope included new kitchens in both units ($18,000 total), new LVP flooring throughout ($8,000), one full bathroom remodel ($7,000), interior paint ($4,000), new appliances ($5,000), updated lighting and electrical ($6,000), HVAC servicing ($3,000), landscaping and curb appeal ($4,000), and a contingency buffer ($5,000). Rehab took 10 weeks. During that time, she was paying approximately $1,530/month in interest on the hard money loan - about $3,825 total in carry costs over the rehab period.

The Rent

After rehab, each unit rented for $1,400/month, bringing total gross rent to $2,800/month. She had both units leased within three weeks of completing the renovation. Market rents in the area for comparable updated duplexes supported these numbers, and the appraiser used them in the rental analysis. The property was now stabilized and ready for the refinance.

The DSCR Cash-Out Refinance

The property appraised at $320,000 after rehab - a $140,000 increase from the purchase price. We structured a cash-out refinance at 75% LTV, giving a loan amount of $240,000. The borrower had a 740 FICO and the DSCR was strong. Rate came in at 6.125% on a 30-year fixed with a 3-year prepay penalty. Monthly P&I was $1,459. Taxes ($280/month), insurance ($165/month), and no HOA brought the total PITIA to $1,904/month. DSCR = $2,800 / $1,904 = 1.47.

The Capital Recycling Math

Total invested: $27,000 (hard money down payment) + $4,500 (purchase closing costs) + $60,000 (rehab) + $3,825 (carry costs) = $95,325. Proceeds from DSCR refi: $240,000 loan - $153,000 (hard money payoff) - $6,000 (refi closing costs) = $81,000 cash back. Net capital still in the deal: $95,325 - $81,000 = $14,325. That's not quite zero out of pocket, but she owns a property worth $320,000 with $80,000 in equity, cash flowing $896/month, with only $14,325 of her own money still tied up.

Monthly Cash Flow and Returns

Gross rent: $2,800. PITIA: $1,904. Net before reserves: $896/month. After 5% vacancy ($140) and 5% maintenance ($140): $616/month net cash flow, or $7,392/year. Cash-on-cash return based on $14,325 still invested: 51.6%. Even if you calculate it on the full $95,325 invested (ignoring the cash back), the cash-on-cash return is still 7.7% - and that's before appreciation and principal paydown. The $81,000 she pulled out is already being deployed on the next BRRRR.

Why the DSCR Loan Made This Possible

A conventional cash-out refi would have required tax returns, income verification, and a 6-month seasoning period before the lender would use the appraised value instead of the purchase price. The DSCR loan had no income verification requirement and the lender allowed the appraised value from day one since the property was stabilized and leased. This let the investor execute the full BRRRR cycle in under 4 months instead of 9-12 months, dramatically improving her annualized return and letting her move on to the next deal faster.