How one investor strategically scaled their portfolio by moving from short-term rehab loans to long-term rental financing.
Real estate investing isn’t just about flipping one property—it’s about building a portfolio, maximizing returns, and using the right financial tools at the right time. One of the most powerful transitions investors make is going from Rehab-to-Loan (RTL) financing to Debt Service Coverage Ratio (DSCR) loans. This shift allows investors to stabilize income-producing assets and scale without the limitations of traditional lending.
At Dynamo Capital, we work with investors at every stage of their journey. In this case study, we’re highlighting the story of Aaron, a California-based investor who successfully transitioned from a short-term rehab project into a cash-flowing rental portfolio using a DSCR loan—and what he learned along the way.
🏚️ The Starting Point: The Fix-and-Flip Game
Aaron began his investing journey flipping distressed single-family homes in inland Southern California. He worked with Dynamo Capital for fast, flexible Rehab-to-Loan (RTL) financing, which allowed him to:
- Acquire undervalued properties quickly
- Access renovation funds through draw schedules
- Complete 3 successful flips in under 12 months
These projects were profitable—but Aaron quickly realized that chasing flip after flip wasn’t sustainable. He wanted consistent, passive income, not just large one-time paydays.
🎯 The Pivot: Holding Instead of Flipping
On his fourth project, Aaron spotted an opportunity.
The property was a 3-bed, 2-bath home in a high-rental-demand area near a university. Originally purchased as another flip, Aaron began crunching the numbers and saw that holding it as a long-term rental would yield strong monthly cash flow.
Key Metrics Before Flip Decision:
- Purchase price: $285,000
- Rehab budget: $40,000
- ARV: $400,000
- Estimated rent: $2,600/month
Rather than selling it, he finished the rehab and started prepping for a refinance into a DSCR loan.
🔄 The Transition: From RTL to DSCR
Dynamo Capital worked with Aaron to smoothly transition his loan structure. Once the rehab was complete and the property was tenant-ready, we began underwriting for a DSCR loan.
DSCR Loan Snapshot:
- Loan Amount: $300,000
- Appraised Value: $410,000
- Monthly Rent: $2,600
- Monthly PITIA: $1,875
- DSCR: 1.39 (well above minimum thresholds)
- Term: 30-year fixed, interest-only option available
Aaron now had: ✅ A fully rented property
✅ Long-term, fixed-rate financing
✅ Positive monthly cash flow
✅ No need to prove personal income (loan qualified on property cash flow)
⚠️ Challenges Faced Along the Way
No transition is without its bumps. Here’s what Aaron had to navigate:
- Timing the Refinance
DSCR lenders want to see rental income in place, but also need the rehab to be fully complete. Coordinating inspections, leases, and tenant move-in took longer than expected. - Appraisal Surprise
The DSCR lender required a new appraisal, which came in $10K lower than the initial estimate. Fortunately, Aaron still had enough equity for the desired loan amount. - Documentation & Expectations
Though DSCR loans are less document-heavy than traditional loans, Aaron still needed an entity (LLC), lease agreements, and a rent roll to close.
📈 Results & Lessons Learned
Aaron’s decision to hold and refinance paid off. With his DSCR loan in place, he now enjoys:
- $725/month in net positive cash flow
- A stabilized, appreciating asset
- The ability to leverage equity for his next deal
He’s since repeated the model two more times and is working toward a portfolio of 10 rentals—all using DSCR financing after the initial value-add through rehab.
Biggest Takeaways:
- Think long-term from day one. Even if you plan to flip, always run rental numbers too.
- Build with the exit in mind. DSCR lenders care about post-reno rentability, so renovate for the tenant market.
- Work with a lender who understands both RTL and DSCR. This creates a smoother path for transitioning your financing strategy.
💬 Final Thoughts
Transitioning from RTL to DSCR is more than just a change in loan type—it’s a mindset shift. It’s about moving from active income to wealth-building, from transactions to assets.
At Dynamo Capital, we specialize in helping investors like Aaron find the right financing for every stage of the journey. Whether you’re flipping your first property or building your buy-and-hold empire, we’ve got the tools, speed, and experience to get you there.
👉 Talk to us today to map out your RTL to DSCR strategy.