Where Strategy Drives Approval: The BRRRR Accelerator #
The ultimate goal of the DSCR investor is not to own one home, but to build a portfolio that generates generational wealth. DSCR loans are the “acceleration fuel” for the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat) because they remove the friction of personal income verification.
1. The Cash-Out Refinance Engine #
The primary mechanism for scaling is the Cash-Out Refinance. This strategy allows you to recycle your initial capital into multiple properties.
How It Works #
- Acquire & Improve: You buy a property (often with cash or a bridge loan) and force appreciation through renovations.
- Stabilize: You place a tenant, generating a lease and establishing a DSCR $> 1.0$.
- Extract Equity: You apply for a DSCR Cash-Out Refinance. The new loan pays off the original debt and puts tax-free cash back in your pocket.
- Repeat: You use that cash as the down payment for the next property.
The DSCR Advantage #
- No Seasoning (Select Lenders): Traditional banks often require you to own a property for 6-12 months before refinancing on the new value. Many DSCR lenders allow for 3-month seasoning or even immediate refinancing based on the new appraised value, dramatically increasing your “Velocity of Money.”
2. Transitioning to Portfolio Loans (Blanket Mortgages) #
Once you reach 5-10 properties, individual loan closings become inefficient and costly. This is when you graduate to the Portfolio Loan.
What is a Portfolio Loan? #
A single DSCR loan that is secured by multiple properties simultaneously.
| Feature | Individual DSCR Loans | Portfolio Loan |
|---|---|---|
| Closing Costs | Paid 10 separate times for 10 properties. | Paid ONCE. Massive savings on title, legal, and origination fees. |
| Interest Rate | Rates vary by property performance. | A blended rate across the entire portfolio, often lower due to loan size. |
| Simplicity | 10 monthly payments, 10 statements. | One monthly payment. |
The “Release Clause” Strategy #
Crucial for scaling: Ensure your portfolio loan includes a Partial Release Clause. This allows you to sell one specific property from the portfolio without being forced to refinance the entire loan. You simply pay off a portion of the balance (e.g., 110% of the allocated loan amount for that asset).
3. Breaking the “Fannie Mae Cap” #
Traditional investors hit a hard wall: Fannie Mae and Freddie Mac strictly limit you to 10 financed properties.
- The DSCR Reality: There is no limit to the number of DSCR loans you can hold. As long as the property cash flows, you can continue to buy. This is the only way to scale to 50, 100, or 500 units without moving to commercial multi-family.
