A hard-money loan lets you buy and fix up a house for a BRRRR (buy, rehab, rent, refinance, repeat) with a fraction of the cash. The refinance then has to pay it off, and what the loan really costs depends on how long that takes and who pays the interest until then.
Can you use a hard-money loan for a BRRRR?
You can use a hard-money loan for a BRRRR, as long as the refinance can pay it off in time. A hard-money loan is a short-term loan from a private lender, secured by the house, at a higher rate than a regular mortgage. It can cover most of the purchase and the rehab until the refinance, a regular 30-year loan, pays it off.
Take a house bought for $90,000 that needs $45,000 of work and will be worth $185,000 when it’s done. The lender covers 90% of the price and all of the work, $126,000, at 10% interest-only: you pay $1,050 a month, and the $126,000 at the end. It also charges 2 points, a $2,520 fee (2% of the loan) paid at closing. Those terms are the example’s assumptions.
Paid for in cash, the house would take $138,600 of yours by month four, when the work ends. The loan cuts that to $19,320. Its points and four months of interest, $6,720, are exactly how much more of your cash a month-four refinance leaves in: $9,345 instead of $2,625.
How soon can a refinance pay off a hard-money loan?
A cash-out refinance sold to Fannie Mae can’t pay off a hard-money loan until month 12. Fannie Mae’s rules for cash-out refinances, new loans that pay off the old one and hand you the difference, say a first mortgage being paid off must be “at least 12 months old at the time of refinance.” Here that first mortgage is the hard-money loan, and the clock runs from the day it was signed to the day the new loan is. That’s the section dated December 10, 2025, current as of September 2026.
The cash buyer’s shortcut, delayed financing, is closed to you. The same section allows it only when the closing statement from the purchase shows that no mortgage was used.
Those rules cover loans sold to Fannie Mae. A lender that keeps its loans, or sells them to other investors, may follow different rules, so month four works only if you find a lender that will refinance that soon. Ask before you borrow, and ask about a house bought with a hard-money loan in particular.
What does the wait cost at month 4 and month 12?
The wait to month 12 costs little on this house if a tenant moves in when the work ends, and $12,000 if it sits empty. Until a tenant moves in, taxes and insurance ($300 a month) and utilities ($150) add $450 a month to the interest. The house rents for $2,250, and the tenant pays the utilities. The new loan is 75% of the $185,000 value, $138,750 at 7.5% over 30 years, with 2% of it paid to close. It pays off the $126,000 and hands you $9,975, whichever month it closes.
| Month 4 | Month 12, rented | Month 12, empty | |
|---|---|---|---|
| Down payment (10% of the price) | $9,000 | $9,000 | $9,000 |
| Closing costs (2%) and points | $4,320 | $4,320 | $4,320 |
| Taxes, insurance and utilities while empty ($450 a month) | $1,800 | $1,800 | $5,400 |
| Hard-money interest ($1,050 a month) | $4,200 | $12,600 | $12,600 |
| Rent after running costs, months 5 to 12 ($1,230 a month) | – | −$9,840 | – |
| Cash back from the refinance | −$9,975 | −$9,975 | −$9,975 |
| Cash left in the house | $9,345 | $7,905 | $21,345 |
These are example figures, not a quote.
Empty, each month past the fourth costs $1,500, so month 12 leaves $12,000 more of your cash in the house.
Rented, the house pays its own interest. Once 8% of the rent goes to empty months, 8% each to repairs, big repairs and a property manager, and $300 to taxes and insurance, $1,230 a month is left. That’s its net operating income, or NOI, and it covers the $1,050 of interest with $180 to spare.
So a rented wait costs mostly time. A month-four refinance hands back $9,975 eight months sooner, and the house then clears $260 a month after the new loan, which leaves that path about $640 ahead by month 12. The rented column assumes the work ends on time and a tenant signs at once. Each month without one costs $1,500.
What if the appraisal comes in low?
A low appraisal hurts more with a hard-money loan, because the new loan has to pay it off. At $166,500, 10% under the expected value, a month-four refinance lends $124,875, less than the $126,000 you owe. You’d bring $3,623 to closing to cover the rest and the closing costs, on top of the $19,320 already in.
Before you borrow, test the deal at an appraisal 10% lower, as this BRRRR example does, and build the finished value from recent sales.
What should a hard-money lender put in writing?
A hard-money loan on a rental doesn’t come with the federal cost disclosures a loan on your own home does, so get every cost in writing. Regulation Z, the federal Truth in Lending rules, doesn’t apply to credit for business purposes, and its official commentary counts credit to buy, fix up or maintain a rental you won’t live in as business credit. So the lender doesn’t have to give you a Loan Estimate, the standard form that lists a mortgage’s costs. Ask for:
- the rate, the points and every other fee
- whether interest runs on the whole loan or only on rehab money paid out so far
- how long it runs and what an extension costs, since a loan due at month 12 leaves no room for a slow refinance
- any charge for paying it off early, in case a lender will refinance at month four
How do you run a hard-money BRRRR in the BRRRR calculator?
The BRRRR calculator has no separate purchase loan, so the hard-money loan goes into the boxes under Buy & rehab.
- Closing costs: add the points as a share of the price. $2,520 is 2.8% of $90,000, so 4.8% instead of 2%.
- Holding costs: the monthly interest plus taxes, insurance and utilities, $1,500 here.
- Holding period: the month the refinance will close, not the month the work ends.
- A rented wait: type the average month. Four empty months at $1,500 come to $6,000, and eight rented months take off $180 each, which leaves $4,560, or $380 a month over 12.
Then go by the dollars the calculator says stay in the deal. The percentage above them counts the lender’s money as yours, so month four shows 94% coming back when your $19,320 got $9,975 back.
Run the BRRRR calculator at month 12 with the house empty until then. If that leaves more of your cash in than you can spare, the deal depends on a tenant moving in fast or a lender that refinances sooner.