Comparing BRRRR Loan Programs: Which is Best for Your Investment?

Choosing the right financing is critical to BRRRR success. Understanding BRRRR loan Illinois options and how to finance a BRRRR deal properly can mean the difference between a profitable investment and a cash-flow disaster.

This guide compares hard money loans for BRRRR, DSCR loans, conventional financing, and portfolio options. You'll learn about BRRRR method financing options, identify the best BRRRR lenders, and understand how real estate investment loans Illinois investors use to scale their portfolios.

Decoding BRRRR Financing: More Than Just a Loan, It's a Complete Strategy

Understanding the financing lifecycle helps you plan effectively.

The Two-Phase Financing Model

Phase 1: Acquisition and Rehab

Short-term financing to purchase and renovate:

• Purpose: Buy property, fund renovation
• Term: 6-18 months typical
• Type: Hard money, bridge, private
• Cost: Higher rates, points
• Key Feature: Speed and flexibility

Phase 2: Refinance to Permanent

Long-term financing for holding period:

• Purpose: Pay off short-term loan, recover capital
• Term: 15-30 years
• Type: DSCR, conventional, portfolio
• Cost: Lower rates, minimal points
• Key Feature: Cash flow and stability

Why Two Phases Are Necessary

Acquisition Challenges

• Traditional lenders won't finance distressed properties
• Need fast closing to beat competition
• Property condition doesn't meet lender standards
• Renovation costs need to be included

Refinance Requirements

• Property must be stabilized (tenant in place)
• Seasoning period often required
• Appraisal must support loan amount
• DSCR or income must meet guidelines

Total Financing Cost Calculation

When comparing options, calculate total cost including both phases:

Cost Element	Phase 1 (6 months)	Phase 2 (Year 1)
Loan Amount	$150,000	$150,000
Interest Rate	12%	7.5%
Interest Cost	$9,000	$11,250
Points	$3,000 (2 pts)	$1,500 (1 pt)
Closing Costs	$2,000	$3,500
Year 1 Total Cost	$14,000	$16,250

The Lender Lineup: Hard Money vs. Private Loans vs. Conventional Refinancing

Each lender type serves different purposes in the BRRRR strategy.

Hard Money Loans

Overview

Hard money loans for BRRRR are asset-based loans from private lenders or funds:

Key Characteristics

Feature	Typical Terms
LTV (Purchase)	70-90% of purchase price
LTC (Including Rehab)	80-90% of total costs
Interest Rate	10-14%
Points	2-4 points
Term	6-18 months
Credit Minimum	580-650
Closing Speed	7-14 days

Best For

• Distressed property acquisition
• Properties needing significant work
• Fast closing requirements
• Investors with lower credit
• First-time investors (with guidance)

Private Money Loans

Overview

Loans from individual investors rather than institutional lenders:

Key Characteristics

Feature	Typical Terms
LTV	Negotiable (60-80%)
Interest Rate	8-12%
Points	0-3 points
Term	Flexible
Credit Requirement	Often none
Closing Speed	As fast as 3 days

Best For

• Relationship-based financing
• Investors with track record
• Complex or unique deals
• Situations requiring flexibility
• Lower cost than hard money

DSCR Loans (Refinance)

Overview

Loans qualifying based on property income, not personal income:

Key Characteristics

Feature	Typical Terms
LTV (Cash-Out)	70-75%
Interest Rate	7-9%
Term	30-year fixed
DSCR Minimum	1.0-1.25
Credit Minimum	620-680
Property Count Limit	None

Best For

• Self-employed investors
• Portfolio scaling (no property limits)
• Investors avoiding income documentation
• Properties with strong rental income

Conventional Investment Loans (Refinance)

Overview

Fannie Mae/Freddie Mac loans for investment properties:

Key Characteristics

Feature	Typical Terms
LTV (Cash-Out)	70-75%
Interest Rate	6.5-8%
Term	30-year fixed
DTI Maximum	43-50%
Credit Minimum	620+
Property Count Limit	10 financed

Best For

• Best rates available
• Investors with strong W-2 income
• Properties 1-4 units
• First 10 properties in portfolio

The Ultimate BRRRR Loan Scorecard: 5 Factors to Compare Before You Commit

Use these factors to evaluate and compare loan options.

Factor #1: Total Cost of Capital

What to Calculate

• Interest cost over expected hold period
• Points and origination fees
• Third-party costs (appraisal, title, etc.)
• Prepayment penalties if applicable
• Extension fees if needed

Comparison Example

For a $150,000 loan held 6 months:

Loan Type	Rate	Points	6-Mo Cost
Hard Money A	12%	3	$13,500
Hard Money B	11%	2	$11,250
Private	10%	1	$9,000

Factor #2: Leverage and LTV

Key Questions

• How much capital do you need to bring?
• What's the max LTV on purchase?
• Will they fund 100% of rehab?
• What LTV on refinance cash-out?

Impact on Returns

Higher LTV means:

• Less capital required per deal
• More deals possible with same capital
• Higher leverage = higher risk if values drop
• Need to balance leverage with safety

Factor #3: Speed and Flexibility

Speed Considerations

• How fast can they close?
• What's the approval process?
• How quickly are draws processed?
• Pre-approval available?

Flexibility Factors

• Extension options if project runs long
• Ability to handle change orders
• Responsiveness to issues
• Experience with similar projects

Factor #4: Qualification Requirements

Borrower Requirements

• Minimum credit score
• Experience requirements
• Liquidity/reserve requirements
• Income documentation needs

Property Requirements

• Property types accepted
• Location restrictions
• Condition limitations
• Minimum/maximum loan amounts

Factor #5: Exit Strategy Compatibility

Questions to Ask

• Does this loan work with my refinance timeline?
• What seasoning do refinance lenders require?
• Are there prepayment penalties?
• What happens if I need to sell instead?

Choosing Your Winner: The Best Loan Program for Your Illinois Investment Goals

Match your situation to the optimal financing strategy.

Decision Matrix: Acquisition/Rehab Phase

Your Situation	Best Option
First deal, limited experience	Hard money with mentorship
Need to close in under 14 days	Hard money or private
Strong relationships, proven track record	Private money
Lower credit score (under 640)	Asset-focused hard money
Significant rehab needed	Hard money with rehab draws

Decision Matrix: Refinance Phase

Your Situation	Best Option
Strong W-2 income, under 10 properties	Conventional
Self-employed, complex taxes	DSCR
10+ properties already financed	DSCR or portfolio
Want best possible rate	Conventional (if qualify)
Shorter seasoning needed	Portfolio or DSCR
Local bank relationship	Portfolio loan

Illinois-Specific Considerations

Market Factors

• Chicago metro offers diverse lender options
• Secondary markets may have fewer choices
• Some lenders specialize in Illinois investment property
• Local portfolio lenders may offer relationship benefits

Finding the Best BRRRR Lenders

• Ask other local investors for referrals
• Attend Illinois real estate investor meetups
• Work with mortgage brokers specializing in investment property
• Compare at least 3 options before committing