From Flip to Rental: Refinancing a Bridge Loan Into Long-Term Debt
Sometimes the best exit from a flip is to keep it. Here's how investors refinance short-term debt into a long-term rental loan, with the numbers.
Short answer
To keep a flip as a rental, you refinance the short-term loan into a long-term DSCR loan sized on the finished property's appraised value and rent. The new loan pays off the bridge, and any surplus can come back to you. Seasoning rules, the appraisal and the new DSCR decide how much you can borrow.
Key points
- The new loan is sized on value and rent.
- It pays off the bridge, with any surplus to you.
- Seasoning and DSCR both cap the new loan.
When keeping the flip makes sense
- Rents in the area support a healthy DSCR
- The sale market has slowed, or selling costs would eat too much of the profit
- You want to build long-term wealth from work you've already done
How the refinance works
The lender orders an appraisal of the finished property and sizes a new DSCR loan on its value and rent. The loan pays off your bridge or hard money loan and closing costs, and anything left comes back to you.
Deal sheet: Flip refinanced into a rental, illustrative
| Amount | |
|---|---|
| After-repair appraised value | $420,000 |
| New DSCR loan, 75% | $315,000 |
| Bridge loan payoff | −$272,500 |
| Estimated closing costs | −$8,000 |
| Cash back | $34,500 |
| New payment, 7.50% with $500 taxes and insurance | $2,703 |
| DSCR at $2,900 rent | 1.07 |
This uses the deal from fix-and-flip financing: the investor keeps the house, gets $34,500 back and holds a rental that covers its payment.
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Timing and seasoning
Many lenders want a minimum period of ownership before they'll use the full appraised value; see cash-out refinancing on a rental. Start the refinance well before your bridge loan matures so extension fees don't eat the gain; see refinancing out of hard money.
Frequently asked questions
Can I refinance a fix and flip loan into a DSCR loan?
Yes. Investors commonly refinance a finished flip into a DSCR loan sized on the appraised value and the property's rent.
How soon can I refinance after a rehab?
It depends on the lender's seasoning rules. Some use the new appraised value after a few months of ownership; others cap the loan at cost until a longer period passes.
Will I get cash back when I refinance a flip?
If the new loan is larger than your payoff and closing costs, the difference can come back to you. The appraisal and DSCR decide how large the new loan can be.
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