Bridge Loan

A bridge loan is short-term financing that carries a borrower from one transaction to the next, in this case from the purchase of a distressed property to the refinance of a finished one. In BRRRR the terms bridge loan and hard money loan are used almost interchangeably for the acquisition financing.

Bridge lenders range from private individuals to institutional funds. Institutional bridge loans on investment property often carry lower rates than classic hard money, 9 to 11% rather than 11 to 13%, with slower approval and more documentation. Both are interest-only, both charge points, both expect to be repaid within a year or two.

Whichever you use, the loan's cost and its term set two of the numbers in the BRRRR calculation: the interest accrued during the hold, and the deadline by which the refinance has to close. A bridge loan with a twelve-month term and a refinance lender with six-month seasoning leaves six months of margin for rehab, leasing and appraisal delays.

Further reading: Bridge Loan on Wikipedia.