Buy and rehab financing is designed for an investment property that needs work before it reaches its intended value, sale condition or rental condition. Understanding the full process—from closing through rehab draws and exit—helps investors avoid treating the loan amount as the entire capital plan. Because Landlord Lending works with multiple investment-property lenders, exact credit, leverage, experience, liquidity, draw, property and documentation guidelines can vary by lender, program and overall deal strength.
What a Buy & Rehab Loan Does
A buy and rehab loan is short-term business-purpose financing designed to fund an investment-property acquisition and eligible renovation costs within one capital structure. Instead of asking the investor to fund the entire renovation out of pocket, the lender can establish a rehab holdback that is released as the project progresses.
How the Loan Is Sized
Lenders commonly evaluate the purchase price, current value, renovation budget, projected after-repair value, borrower experience, credit, liquidity and overall project economics. The final structure may be constrained by more than one leverage test, so the maximum loan is not simply the rehab budget plus the purchase price.
What Happens at Closing
At closing, acquisition proceeds are typically funded to complete the purchase. The rehab budget may be held back and released through the draw process as renovation work is completed and verified.
How Rehab Draws Work
The investor completes approved renovation work, submits a draw request with required documentation, and the lender verifies completion before releasing eligible funds. Investors should plan for working capital between draw releases.
How the Loan Is Repaid
The loan is typically repaid through the sale of the renovated property or through a refinance into long-term financing once the property is stabilized. The exit strategy should be defined before closing.
How Landlord Lending Helps
Landlord Lending helps real estate investors evaluate buy and rehab financing based on the property, renovation scope, budget, exit strategy and overall deal rather than assuming every scenario fits one lender’s program.
Explore the Buy and Rehab Loan.
Related: Buy & Rehab Loans: The Complete Guide · BRRRR Financing: How to Finance the Buy, Rehab and Refinance
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Request Loan TermsFrequently Asked Questions
Do buy and rehab loans include renovation funds?
They can. Eligible rehab proceeds are commonly placed in a holdback and released through the lender's draw process.
Do I receive the full rehab budget at closing?
Often no. Draw and disbursement methods vary, so investors should understand the lender's process before closing.
Can a buy and rehab loan be refinanced into a DSCR loan?
Potentially, once the property meets the long-term lender's condition, rent, value and ownership requirements.