DSCR Loans: 3 Most Common Questions Answered

Here at The Cash Flow Company we receive questions daily regarding DSCR loans. Today we are going to focus on the 3 most common questions and give you the answers you need to succeed. 

First, can you use a DSCR loan for a multiplex?

While there are fewer lenders who offer loans for multiplexes, there are still options available to you. DSCR loans do exist for 5 or more units and include commercial properties as well. However, you need to make sure that at least 50% of the property is residential. 

Second, what documents do you need for a DSCR loan?

Unlike traditional loans, DSCR loans are easy to process. The items that you will need for a DSCR loan include a lease agreement, operating agreement, appraisal, expenses, and reserves. To clarify, expenses include taxes, insurance, HOA, and flood insurance. Reserves on the other hand include bank statements, retirement funds, and investments. 

Finally, what happens if the rental doesn’t break even?

Most lenders want the properties to break-even. Breaking even means that your income can cover your expenses. Income is the rent that you are receiving for the property. Expenses included the mortgage, insurance, taxes, HOA, and flood. If you divide the income by the expenses, it should equal 1, which is the break-even point. However some lenders are okay with deals that have a ratio that is less than 1. Lenders understand that sometimes investors just need to get out of a bad loan. In this case, they offer higher rates and lower LTV’s. 

Do you have any questions regarding DSCR loans? Contact us today to find out how a DSCR loan can help you succeed in real estate investing! 

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