Short-term rehab capital or long-term rental financing? The right choice depends on your exit. Here's how to decide — and how the BRRRR strategy uses both.
Two of the most common investor loans do very different jobs. Choosing between them comes down to one question: what's your exit?
Fix & Flip: built for the sale
A fix & flip loan is short-term capital that funds the purchase and the rehab. At Hera, terms run 9 to 18 months, fixed-rate and interest-only (24 months only by exception, for large-scale heavy rehab and ground-up projects). Leverage can be high because the plan is to renovate and sell quickly: on a light rehab purchase (a budget under 50% of the as-is value), investors in Hera's top experience tier, with 10 or more completed projects, can reach up to 95% LTC, while less experienced investors get lower leverage. You're paying for speed and flexibility, and you exit when the property sells.
DSCR: built for the hold
A DSCR loan is long-term financing for a property you intend to keep and rent; at Hera, it's a 30-year loan. It qualifies on the property's cash flow, with a minimum DSCR of 1.00x, and is designed for stability rather than speed. Rates and other terms depend on the property and the borrower.
The BRRRR strategy uses both
Many investors don't choose one or the other — they use them in sequence. BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat:
- •Buy and Rehab with a fix & flip loan
- •Rent the stabilized property
- •Refinance into a DSCR loan to pay off the short-term debt and lock in long-term financing
- •Repeat, pulling your capital forward into the next deal
How to decide
If you plan to sell within the loan term, a fix & flip loan is the tool. If you're holding for cash flow, DSCR is the tool. And if you're doing BRRRR, plan the refinance from day one — ideally with a lender that offers both, so the hand-off is simpler.
A shortcut
Not sure which fits? Run the fix & flip side through Hera's terms calculator and talk to a loan officer about the DSCR side (the calculator doesn't cover DSCR loans), then compare the numbers side by side before you commit to a strategy.
This article is for general information only and is not legal, tax or financial advice. Loan programs, rates and terms are subject to credit approval and underwriting and may change without notice.