Rehab-to-Rent Loans
Acquisition and renovation financing in one program. Fund your purchase and rehab, then convert to long-term rental financing without re-qualifying.
Rehab-to-Rent Loans: Acquisition and Renovation Financing in One Program
Rehab-to-rent loans provide real estate investors with a streamlined way to fund both property acquisition and renovation costs, then convert to long-term rental financing without requiring a new loan application.
This specialized program recognizes that successful real estate investing often involves finding undervalued properties, renovating them to increase value and rental income, and then holding them as long-term investments. The BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) requires financing that can adapt to this multi-phase approach.
For BRRRR investors, self-employed borrowers without traditional income documentation, and anyone pursuing value-add rental strategies, rehab-to-rent loans offer the flexibility and efficiency needed to scale portfolios effectively.
What is a Rehab-to-Rent Loan?
- Definition
- Rehab-to-rent loans are specialized financing programs that combine acquisition and renovation costs in one loan, then convert to long-term rental financing. These programs support the BRRRR method and focus on asset-based underwriting rather than traditional income verification.
- How it works
- These loans fund both your property purchase and renovation costs under one program. After rehab completion, the loan automatically converts to long-term rental financing without requiring you to re-qualify. The process involves two phases: short-term rehab funding and long-term rental financing.
- Key advantage
- Rehab-to-rent loans eliminate the need for multiple loan applications and closings. You get acquisition and renovation funding upfront, then seamlessly transition to long-term financing once the property is stabilized and generating rental income.
Rehab-to-Rent Loan Eligibility Requirements
You may be eligible for a rehab-to-rent loan if you meet these key requirements:
| Requirement | Details |
|---|---|
| Credit score | 620 FICO score minimum (680 preferred for best pricing) |
| Equity requirement | 20% minimum equity in the project |
| Loan amount | Up to 75% of After-Repair Value (ARV) |
| Rehab phase | 9 months minimum interest-only payments |
| Rental phase | Up to 40 years fixed or interest-only |
| Reserves | 3 months for rehab, 6 months for rental phase |
| Property type | Investment properties and value-add opportunities |
| Underwriting | Asset-based, focusing on ARV and rental income |
Did you know: Rehab-to-rent loans can fund 100% of purchase plus 100% of rehab costs, capped by the After-Repair Value.
Why Rehab-to-Rent Loans Instead of Traditional Financing?
Traditional banks often don't offer programs designed for real estate investors who need to combine acquisition and renovation financing. They typically require separate loans for purchase and renovation, which means multiple applications, multiple closings, and additional costs that can make value-add strategies unfeasible.
Your first bank just doesn't offer the right program for you.
Think of it like when a customer asks for something your business doesn't offer. Maybe they want delivery but you only do pickup, or they need a service you don't provide. You're not saying no because there's anything wrong with them—you just don't offer that particular service. Same with mortgages. Traditional banks work great for most people, but they don't offer the programs that BRRRR investors need for efficient portfolio scaling.
Traditional banks use conventional underwriting that works well for primary residence buyers but struggles with investment properties requiring renovation funding. Your investment strategy may involve finding undervalued properties that need work, but conventional programs can't accommodate the combined acquisition and renovation approach.
Rehab-to-rent loans are perfect for BRRRR investors who want to scale efficiently, self-employed borrowers without traditional income documentation, speed-focused landlords who need quick closings, or anyone pursuing value-add rental strategies where renovation flexibility is critical.
This isn't about finding loopholes or gaming the system. It's about working with lenders who understand how real estate investing actually works. Rehab-to-rent loans are offered by lenders who work with investors every day. They look at the property's potential value after renovation and rental income potential—the factors that actually matter for long-term investment success—rather than your personal financial situation.
For a no obligation conversation about your mortgage, contact Bradley Swearingen (#2577725) of Rain City Capital at 214-756-7076.
Example Use Cases and Scenarios
BRRRR Portfolio Builder
Sam buys undervalued homes, renovates them, rents them out, and refinances to recycle capital for the next project.
Self-Employed Investor
Priya qualifies based on ARV and rental income potential rather than personal income documentation.
Speed-Focused Landlord
Carlos closes quickly on a distressed duplex, renovates, then transitions to 30-year financing without re-qualifying.
Value-Add Strategy
An investor acquires a property below market value, renovates to increase rental income, then secures long-term financing.
| Scenario | Description |
|---|---|
| BRRRR Portfolio Builder | Sam buys undervalued homes, renovates them, rents them out, and refinances to recycle capital for the next project. |
| Self-Employed Investor | Priya qualifies based on ARV and rental income potential rather than personal income documentation. |
| Speed-Focused Landlord | Carlos closes quickly on a distressed duplex, renovates, then transitions to 30-year financing without re-qualifying. |
| Value-Add Strategy | An investor acquires a property below market value, renovates to increase rental income, then secures long-term financing. |
Did you know: Rehab-to-rent loans automatically convert to long-term financing without requiring you to re-qualify.
How Rehab-to-Rent Loans Work
Rehab-to-rent loans follow a specialized two-phase process designed specifically for investors pursuing value-add rental strategies. The key differences are combined financing and automatic conversion—these loans eliminate the need for multiple loan applications and closings.
The Rehab-to-Rent Loan Process
- 1. Property Analysis & ARV Assessment
- The process begins with property analysis where lenders examine the property's current value and After-Repair Value (ARV), followed by renovation budget review including contractor bids and project timeline. Lenders then calculate the maximum loan amount based on up to 75% of ARV, ensuring the property provides sufficient security for both acquisition and renovation costs. This analysis determines your loan eligibility based on the property's potential value rather than current condition.
- 2. Two-Phase Loan Structure
- Unlike conventional loans, rehab-to-rent underwriting focuses on the property's potential rather than current condition. This includes reviewing your rehab budget and contractor bids, exit strategy showing how you'll stabilize and rent the property, property appraisal considering ARV and rental potential, and investment plan documentation including renovation timeline and rental projections. The underwriting process prioritizes your ability to execute the renovation and generate rental income.
- 3. Asset-Based Underwriting
- Experienced underwriters review your investment profile using asset-focused analysis instead of traditional income verification. They assess the property's ARV through appraisal and market comparisons, renovation viability through budget analysis and contractor qualifications, and investment potential through rental market analysis and exit strategy evaluation. The underwriting process includes the same risk assessment as conventional loans, just with a focus on property potential and renovation execution.
- 4. Seamless Phase Conversion
- Once renovation is complete and the property is stabilized with tenants, the loan automatically converts to long-term rental financing without requiring a new application or closing. You'll maintain the same loan terms and interest rates, just with extended repayment terms. The conversion process is seamless and doesn't require additional documentation or qualification.
Rehab-to-Rent Loans vs Conventional Mortgages
Understanding the key differences between rehab-to-rent loans and conventional mortgages can help you choose the right financing option for your situation.
| Feature | Rehab-to-Rent Loans | Conventional Loan |
|---|---|---|
| Who Qualifies | BRRRR investors, self-employed borrowers, speed-focused landlords, value-add investors, and anyone pursuing rental portfolio expansion | W-2 employees, salaried workers |
| Income Documentation | Asset-based underwriting focusing on ARV and rental income potential, no traditional income verification required | W-2s, pay stubs, tax returns |
| Minimum Credit Score | 620 FICO score minimum | 620 |
| Minimum Down Payment | 20% equity minimum | 3% |
| Private Mortgage Insurance | Not applicable | Private mortgage insurance (PMI) |
| Occupancy Type | Investment properties only | Primary residences, second homes, investment properties |
| Property Type | Single-family, multi-family, distressed properties, value-add opportunities | Single-family homes, condos, townhouses, 2-4 unit properties |
| Interest Rates | Higher than traditional rates due to risk | Market rates |
| Processing Time | 5 business days | 30-45 days |
| Closing Costs | Origination fees, appraisal fees, closing costs, potential draw fees | 2-5% of loan amount |
| Prepayment Penalty | Varies by lender | None |
| Reserves Required | 3 months for rehab, 6 months for rental phase | 2-6 months of PITI |
| Debt-to-Income Ratio | Not considered | Up to 43% |
| Maximum Loan Amount | 75% ARV maximum | $806,500 |
| Appraisal Requirements | Property appraisal considering ARV and rental potential | Standard appraisal required |
| Occupancy Requirements | Investment property only | Primary residence for 12 months |
| Non-Warrantable Condos | Eligible with additional requirements | Not eligible |
| Manufactured Homes | Eligible if on permanent foundation | Eligible if on permanent foundation |
| ADU Properties | Eligible as investment property | Not eligible |
| Barndominiums | Eligible with proper appraisal and insurance | Not eligible |
| Tiny Homes | Eligible if meets minimum square footage requirements | Not eligible |
| Mixed-Use Properties | Eligible for residential portion | Not eligible |
| Rural Properties | Eligible | Eligible |
| Feature | Rehab-to-Rent Loans | Conventional Loan |
|---|---|---|
| Who Qualifies | BRRRR investors, self-employed borrowers, speed-focused landlords, value-add investors, and anyone pursuing rental portfolio expansion | W-2 employees, salaried workers |
| Income Documentation | Asset-based underwriting focusing on ARV and rental income potential, no traditional income verification required | W-2s, pay stubs, tax returns |
| Minimum Credit Score | 620 FICO score minimum | 620 |
| Minimum Down Payment | 20% equity minimum | 3% |
| Private Mortgage Insurance | Not applicable | Private mortgage insurance (PMI) |
| Occupancy Type | Investment properties only | Primary residences, second homes, investment properties |
| Property Type | Single-family, multi-family, distressed properties, value-add opportunities | Single-family homes, condos, townhouses, 2-4 unit properties |
| Interest Rates | Higher than traditional rates due to risk | Market rates |
| Processing Time | 5 business days | 30-45 days |
| Closing Costs | Origination fees, appraisal fees, closing costs, potential draw fees | 2-5% of loan amount |
| Prepayment Penalty | Varies by lender | None |
| Reserves Required | 3 months for rehab, 6 months for rental phase | 2-6 months of PITI |
| Debt-to-Income Ratio | Not considered | Up to 43% |
| Maximum Loan Amount | 75% ARV maximum | $806,500 |
| Appraisal Requirements | Property appraisal considering ARV and rental potential | Standard appraisal required |
| Occupancy Requirements | Investment property only | Primary residence for 12 months |
| Non-Warrantable Condos | Eligible with additional requirements | Not eligible |
| Manufactured Homes | Eligible if on permanent foundation | Eligible if on permanent foundation |
| ADU Properties | Eligible as investment property | Not eligible |
| Barndominiums | Eligible with proper appraisal and insurance | Not eligible |
| Tiny Homes | Eligible if meets minimum square footage requirements | Not eligible |
| Mixed-Use Properties | Eligible for residential portion | Not eligible |
| Rural Properties | Eligible | Eligible |
Real-World Example: Rehab-to-Rent Loans
The BRRRR Portfolio Builder's Success Story
Sam, a seasoned real estate investor, had successfully built a portfolio of 8 rental properties using the BRRRR method. His strategy involved finding undervalued homes in emerging neighborhoods, renovating them to increase value and rental income, then refinancing to pull out equity for the next project. However, his latest opportunity—a distressed duplex listed at $280,000 that needed $45,000 in renovations—presented a financing challenge.
When Sam approached his traditional bank for financing, he faced the familiar roadblock. Despite having excellent credit at 720 and substantial assets, the conventional lender could only offer a purchase loan for the current property value. For the renovation costs, he would need a separate home improvement loan, which meant two separate applications, two separate closings, and significantly higher costs that would eat into his profit margins.
Frustrated but determined to continue his portfolio expansion, Sam discovered rehab-to-rent loans through another lender. This specialized program would fund both the purchase and renovation costs in one loan, then automatically convert to long-term rental financing once the property was stabilized. By analyzing the property's ARV of $380,000 after renovation, the lender calculated he could qualify for a $285,000 loan at 75% ARV—covering both the $280,000 purchase and $45,000 renovation costs.
The process was streamlined: he provided the purchase contract, renovation budget, contractor bids, and rental projections. No traditional income verification was required since the loan was based entirely on ARV and rental income potential. Within 8 business days, he received approval and closed on the property.
Over the next 4 months, Sam completed the renovations and secured a tenant at $2,800 per month. The loan automatically converted to 30-year fixed financing without requiring a new application. This story illustrates how rehab-to-rent loans can enable efficient portfolio expansion for BRRRR investors who need combined acquisition and renovation financing.
Did you know: Rehab-to-rent loans support the BRRRR method for efficient portfolio scaling.
Benefits & Considerations
Rehab-to-rent loans offer significant advantages for BRRRR investors and value-add strategies, but they also come with important considerations to weigh.
Key Benefits: Combined financing, automatic conversion, BRRRR support, asset-based underwriting
- Combined financing
- Fund both acquisition and renovation costs under one loan program, eliminating the need for multiple applications and closings.
- Automatic conversion
- Seamlessly transition from short-term rehab funding to long-term rental financing without requiring a new loan application.
- BRRRR support
- Perfect for the Buy, Rehab, Rent, Refinance, Repeat method, enabling efficient portfolio scaling and capital recycling.
- Asset-based underwriting
- Focus on property value and rental income potential rather than traditional income verification, making approval more accessible.
- Fast closing
- Close in as little as 5 business days due to streamlined underwriting focused on property potential rather than personal finances.
- Flexible terms
- Interest-only payments during rehab phase, then extended terms up to 40 years for the rental phase.
Important Considerations: Higher costs, renovation execution, ARV accuracy, reserve requirements
- Higher costs
- Interest rates are typically higher than traditional mortgage rates due to the renovation risk and specialized nature of the program.
- Renovation execution
- Success depends on your ability to complete renovations on time and within budget. Delays or cost overruns can affect the conversion to long-term financing.
- ARV accuracy
- The loan amount is based on After-Repair Value, so accurate renovation cost estimates and market value projections are critical for proper financing.
- Reserve requirements
- 3-6 months of reserves required for the rehab phase, plus 6-12 months for the rental phase, which can be substantial for larger projects.
- Draw-based funding
- Renovation funds are often released in stages after work completion, requiring careful project management and cash flow planning.
- Exit strategy dependency
- Successful conversion to long-term financing depends on completing renovations and securing stable rental income within the rehab phase timeline.
For a no obligation conversation about your mortgage, contact Bradley Swearingen (#2577725) of Rain City Capital at 214-756-7076.
Frequently Asked Questions About Rehab-to-Rent Loans
Get answers to the most common questions about rehab-to-rent loans. Whether you're wondering about qualification requirements, documentation needs, or how the process works, we've covered the essential information below.
What is a rehab-to-rent loan?
How do rehab-to-rent loans work?
Who qualifies for rehab-to-rent loans?
What are the typical requirements?
How much can I borrow?
What credit score do I need?
How long are the loan terms?
What documentation do I need?
How do the two phases work?
What is the BRRRR method?
How fast can I close?
What happens after renovation?
Can I use this for my first investment property?
Bradley Swearingen
Loan Officer at Rain City Capital
Bradley Swearingen Customer Reviews
Read verified customer reviews for Bradley Swearingen at Rain City Capital. This is real feedback from real borrowers who used Bradley Swearingen and their colleagues for a mortgage loan.
"I recently had the pleasure of working with William Guyett at Rain City Capital for a hard money loan on my latest property flip. From the outset, William made the entire process not only smooth but impressively quick, which is crucial in the fast-paced real estate investment world. What stood out to me was the simplicity and efficiency of the rehab draw process. Often, this can be a point of frustration due to complicated procedures and delays, but William ensured everything was straightforward and hassle-free. His professionalism, knowledge, and dedication to customer service significantly contributed to the success of my project. I truly appreciated the personal attention and guidance William provided throughout the loan process. It's clear that he values his clients and goes above and beyond to meet their needs. If you're looking for a reliable and supportive hard money lender, I highly recommend William Guyett and Rain City Capital for your next investment project. Working with him was a fantastic experience, and I look forward to future opportunities to collaborate again."
"Carolina is the most professional, knowledgeable, positive, supportive, responsive, and proactive lender you will find! She makes other lenders look like amateurs. I would highly recommend Carolina for all of your lending needs and now that I have found her, will not be going with anyone else!"
"I had the pleasure of working with Carolina on my recent real estate purchase, and I couldn't be happier with the experience. From start to finish, she was amazing—extremely responsive, knowledgeable, and always available to answer my questions. Carolina made the loan process smooth and stress-free, keeping me updated every step of the way. Her professionalism and dedication truly stood out, and I felt supported throughout the entire transaction. I highly recommend Carolina to anyone in need of a reliable and attentive lender."
BRRRR Portfolio Builder
Sam buys undervalued homes, renovates them, rents them out, and refinances to recycle capital for the next project.
Self-Employed Investor
Priya qualifies based on ARV and rental income potential rather than personal income documentation.
Speed-Focused Landlord
Carlos closes quickly on a distressed duplex, renovates, then transitions to 30-year financing without re-qualifying.
Value-Add Strategy
An investor acquires a property below market value, renovates to increase rental income, then secures long-term financing.
| Scenario | Description |
|---|---|
| BRRRR Portfolio Builder | Sam buys undervalued homes, renovates them, rents them out, and refinances to recycle capital for the next project. |
| Self-Employed Investor | Priya qualifies based on ARV and rental income potential rather than personal income documentation. |
| Speed-Focused Landlord | Carlos closes quickly on a distressed duplex, renovates, then transitions to 30-year financing without re-qualifying. |
| Value-Add Strategy | An investor acquires a property below market value, renovates to increase rental income, then secures long-term financing. |
Similar Mortgage Programs to Rehab-to-Rent Loans
If rehab-to-rent loans are not the right fit, these alternative programs might work better for your situation. Each has different requirements and lenders who specialize in helping borrowers with specific challenges get approved for mortgages.
Bridge Loans
Bridge loans provide fast, short-term financing for real estate investors needing quick acquisition funds. Close in 5-15 days with flexible terms and asset-based underwriting.
Construction-to-Permanent Loans
Build your dream home with a single loan that covers construction and converts to permanent financing. Perfect for custom home builders and those wanting to build from the ground up.
DSCR Loans
Debt Service Coverage Ratio loans for real estate investors. Perfect for purchasing rental properties based on rental income rather than personal income.
Important Compliance Information
Disclaimer: This information is for educational purposes only. AnotherLender.com is not a lender and does not make loans. We connect borrowers with licensed mortgage professionals. All loan approvals are subject to lender underwriting guidelines and individual qualification. Rates and terms may vary. Consult with a qualified mortgage professional for personalized advice.