What if I decide to keep the flip as a rental?
If you decide to keep a flip as a rental, you refinance the flip loan into a long-term loan, usually a DSCR loan, once the renovation is complete and the property is rented, typically three to six months after closing for a rate-and-term refinance or six to twelve months for cash-out. The property has to cover the new payment by about 1.20, and your credit needs to be at 660 or better.
The sequence
- Finish the renovation and close out permits.
- Lease the property at or above the appraiser's likely market rent.
- Apply for the DSCR refinance with the lease, photos, and the rehab file.
- Appraisal establishes the new value and market rent.
- The DSCR loan pays off the flip loan and, on a cash-out, returns part of your equity.
| Refinance type | Typical seasoning | Typical maximum LTV |
|---|---|---|
| Rate and term (pay off the flip loan) | 0 to 6 months, many lenders at 3 | 75 to 80 percent |
| Cash-out | 6 to 12 months | 70 to 75 percent |
Ranges vary by lender.
The numbers that need to work
Coverage. Rent divided by the new full payment, including taxes and insurance, at 1.20 or better for good pricing. If the rent is $2,800 and the payment is $2,300, the ratio is 1.22.
Value. The refinance loan at 75 percent of the new appraised value has to pay off the flip loan plus costs. A $350,000 flip loan needs an appraisal of about $475,000 at 75 percent to pay off cleanly.
Credit and reserves. A 660 minimum score with most DSCR lenders, and three to six months of the new payment in reserves.
Timing against the flip loan
The flip loan's maturity and minimum interest period set the clock. If the flip loan matures in twelve months and seasoning for cash-out is six, the sequence fits. If you want cash-out at month four, take a rate-and-term refinance now and a cash-out later, or wait if the extra months of flip interest cost less than the difference.
A worked example
Purchase $280,000, rehab $70,000, flip loan $315,000 at 11 percent. Renovation done at month four, leased at $3,000 by month five, appraised at $460,000. At month six, a DSCR cash-out at 75 percent is $345,000. New payment with taxes and insurance about $2,450, for a ratio of 1.22. The refinance pays off $315,000 plus costs and returns about $20,000. Total flip loan interest over six months: about $17,000.
Why plan it before you buy
A flip that also works as a rental has two exits. If the sale market softens, the rental refinance carries the property. If rents are too low to cover a DSCR payment, the only exit is a sale, and the purchase price has to reflect that.
How CommFi handles it
Our lending desk prices the flip loan and the DSCR refinance on the same application, so the rental exit is confirmed before you close the purchase. It funds direct when it fits, and when a DSCR lender with better seasoning terms is the right match, the desk searches a database of 7,000+ lenders and the ones that fit compete for the file. Zero upfront fees.
Related reading
Related questions
- Can I turn a flip into a rental?
- Yes. Finish the work, lease the property, and refinance the flip loan into a DSCR loan once seasoning is met.
- How soon can I refinance a flip into a rental loan?
- Rate-and-term refinances often allow the appraised value at three months. Cash-out usually requires six to twelve months.
- What DSCR do I need to refinance a flip?
- About 1.20 for good pricing. Some lenders go lower at reduced leverage.
- Will the refinance pay off my flip loan?
- If the new appraised value at 75 percent covers the flip loan balance plus costs. Provide comps and the rehab file to support the value.
- Do I need tax returns to refinance a flip into a rental?
- Not for a DSCR loan. It qualifies on the property's rent, your credit, and reserves.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.