Fix and Flip vs BRRRR: Which Strategy, Which Loans, and the Math on Each Exit
Fix and flip and BRRRR start with the same loan: a short-term fix and flip loan that funds the purchase and the renovation. The difference is the exit. A flip sells the house and repays the loan, so you get your profit in cash within months. A BRRRR rents the house and refinances into a 30-year DSCR loan. You keep the property, and you only get your cash back if the after-repair value is high enough to cover it.
Fix and flip vs BRRRR at a glance
| Fix and flip | BRRRR | |
|---|---|---|
| First loan | Fix and flip loan: up to 90% of cost and 75% of ARV, 12–18 months | Same |
| Exit | Sell | Rent, then a DSCR cash-out refinance at up to 75% of value |
| Cash comes back | At the sale, with the profit | At the refinance, if the appraisal supports it |
| What you own afterward | Nothing; cash to redeploy | A rental with equity and monthly cash flow |
| The test that decides it | Sale price minus every cost | The appraisal, and the rent covering the new payment (DSCR) |
| Timing rule to know | Sell before the loan matures | Under six months of ownership, the refinance is capped at cost plus documented improvements |
Same house, both exits
You buy a house for $180,000 and spend $40,000 on the rehab, for a total cost of $220,000. The after-repair value is $300,000 and market rent is $2,400 a month. With one or two completed deals you’re in the 85% tier: 85% of cost is $187,000, below the 70%-of-ARV limit of $210,000, so the loan is $187,000 and you put in $33,000. At an illustrative 11% interest-only for six months, interest on the full balance comes to about $10,285. That overstates it a little, because rehab money is drawn in stages.
| Flip (sell at month 6) | BRRRR (refinance at month 7) | |
|---|---|---|
| Exit | Sale at $300,000, less ~7% selling costs ($21,000) | DSCR cash-out at 75% of $300,000 = $225,000 |
| Pays off flip loan | $187,000 | $187,000 |
| Cash back | $92,000 | $38,000 |
| Your cash in (down payment + interest) | $43,285 | $43,285 |
| Result | About $48,700 profit | About $5,300 left in the deal; you own a $300,000 rental with $75,000 of equity |
| New monthly payment | None | $2,101 PITIA at 8.00% ($1,651 P&I, $300 taxes, $150 insurance) |
| DSCR | — | $2,400 ÷ $2,101 = 1.14 |
The flip turns $43,000 into about $48,700 of profit in six months, before the costs left out of the table and before tax. The BRRRR leaves about $5,300 in the deal and hands you a rental that covers its own payment with $299 a month to spare. That margin has to absorb vacancy, repairs and management, so it is thin. The refinance side is worked through in more detail on the DSCR cash-out refinance page.
Timing changes the BRRRR number. Refinance at month four and the loan is capped at cost plus documented improvements, $220,000 here instead of $225,000. A typical DSCR refinance closes about 30 days from the appraisal order, so start it at month four or five of a 12-month note.
Which strategy fits you
- Flip if you need the cash back to fund the next deal, the market is strong for retail buyers, or the rent won’t cover a 75% loan.
- BRRRR if the rent comfortably covers the payment at 75% of value, you want long-term equity and cash flow, and you can wait six months before refinancing.
- Either way, the first loan is the same. Lenders look at your line-item scope of work, your ARV comps and your completed deals. The fix and flip loan page lists the requirements by experience tier.
When BRRRR is the wrong call
If the ARV comps are thin, the appraisal decides how much cash comes back, and a low appraisal can leave $30,000 or more trapped in the house. If the rent only covers the payment at an optimistic estimate, the DSCR loan will be sized down to whatever the appraiser’s rent schedule supports. And if you might sell within a few years, check the prepayment penalty on the DSCR loan before you choose a structure; a step-down penalty can cost more than the rate you saved.
When flipping is the wrong call
If your margin only works at the top of the ARV range, or the local market is softening, a flip carries all of its risk at the sale. Holding costs keep running every month the house sits unsold, and the flip loan has a maturity date. A property that rents well can be a better BRRRR than a flip, even when the flip looks better on paper.
If you’re not sure which exit fits a deal, send it to us with the purchase price, rehab budget, ARV comps and expected rent. We’ll size both loans against the same numbers.