Tag Archive for: cash flow

DSCR Loan: Can I Buy Down My Rate?

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DSCR Loan: Can I Buy Down My Rate?

Many investors ask whether or not they can buy down their rate when using a DSCR loan. The answer is yes! This is one of the many options available for investors who are searching for a DSCR loan. It is important to find the best one for your property to not only create greater cash flow, but create wealth as well. While rents are increasing, they are thankfully not increasing very fast. However, rates are still high and are falling between 7 and 8. These are the times when you really need to work your numbers and products in order to find the right DSCR loan for your rental property.  

Are you above the break even point for DSCR ratios?

A DSCR loan has always been a 30 year product, meaning that it is amortized over 30 years. However, there are other options out there that will typically give you the benefit of qualifying. Here at The Cash Flow Company, we typically see people who are just below the break even point on DSCR ratios. Just to clarify, the break even point on DSCR ratios is normally 1 or 1.1 depending on the lender. 

How do you change the numbers in your favor?

Many investors are wondering how they can change their numbers even when rents, taxes, and insurance are not going to change. In order to make an impact on your numbers you are going to have to change your interest rate, look at interest only loans, or find a 40 year product. By looking outside of the typical 30 year box, you will be able to find a number that fits your property. 

Let’s look at buying down your rate.

Buying down your rate means that you are paying an extra point, which is 1% of your loan to the lender in order to get a better rate. A better rate would be a better payment, and which would allow you to qualify.

Loan amount $250K
Net Rent $1,725
Pay down interest (1%)  7.35%
Monthly payment  $1,722
Break even point (Rents – Monthly payment) $3 under

While there is not much cash flow right now, it does allow investors to get into the property. It also creates an opportunity to build an asset. 

Set yourself up for success.

There is no reason to get into real estate investing unless you are creating wealth by creating cash flow. Just to clarify, creating wealth is setting yourself up for long term success. On the other hand, cash flow is what you are creating right now. It is important that you not only look at making the right moves now, but also understand how everything will line up for the future. For example, a property that was purchased for $25K 20 years ago is now worth $400K. There is a lot of money to be made in real estate investing. Set yourself up for success by going through the numbers and focusing on finding the best product. 

Start looking for the best product for you!

Now is the time to look into different products to see which is best for you and your property. By buying down your rate you will have the opportunity to create the cash flow you need to succeed. Here at The Cash Flow Company we want to help you find the best product for you! Contact us today to walk through the numbers.

Watch our most recent video to find out more about DSCR Loan: Can I Buy Down My Rate?

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Help! I Can’t Get a DSCR Loan Because of My Credit

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Help! I Can’t Get a DSCR Loan Because of My Credit

Many investors are struggling to get a DSCR loan because of their low credit score! However, there is a magical solution that can easily solve this problem. It is called a 911 usage loan! Here at The Cash Flow Company we help people raise their score so that they can get the loan they need. On average we see 7 out of 10 people struggle with a usage problem. How can they get back on their feet? Let’s take a closer look at how you can magically improve your credit score today!

Usage problem uncovered.

Usage loans are very common in this business because many investors have a usage problem. The usage problem is created when investors excessively use their personal credit cards or personal loans to pay for their business expenses. This will affect you everywhere you go, whether it’s a flip project or you’re applying for a DSCR loan. Here at The Cash Flow Company we deal a lot with credit score struggles, fix and flip properties, and rental properties. No matter what the project is, having good credit is the key to getting the funding you need.

Credit score struggles.

If you are above 30% usage on your credit cards, your  score  will begin to decrease. This percentage is also referred to as the credit utilization rate. Investors who come in with a 640 or a 660 credit score often need to increase their score to 700. In doing so, they will be able to get either the LTV or rate they need to create cash flow. Nowadays rates are still in the 7’s or 8’s. That is why it is so important to get the best rate you can in order to maximize both your LTV and cash flow. 

How can a private loan help your credit?

One quick way to increase your credit score is to use a 911 loan. This loan is used to pay down credit card debt by using private money. These private funds are secured with a property to ensure the repayment of the loan. Once the credit cards are taken off of the credit report and the new statements cycle, credit scores will then reflect the changes. 

Where do you get started?

The first thing that you need to do is run a simulation. We ask investors to do a simulation on MyFico, Credit Karma, or Experian to see how paying off a credit card will impact their credit score. We have seen people max out their credit cards at $3K, while others are maxed out at $175K. These maxed out credit cards are not only impacting their credit scores, but their DTI as well. To clarify, DTI stands for the debt to income ratio. 

For example: A client in Texas just went through a simulation and his credit score went up 100 points. He went from 653 to over 753 by simply paying off the credit cards that he had maxed out. 

High credit score means higher cash flow.

In the following example we are going to look at how credit scores can drastically impact your ability to qualify for a DSCR loan. Not only will a lower credit score increase your interest rate, but it will decrease the cash flow for your property as well. Remember, hurdle number one is making sure that both you and your property qualify for the loan. By taking 2 to 4 weeks to get the 911 usage loan, you will be able to not only buy the property, but you can then refinance it later on. This method also provides the opportunity for you to move over any remaining balances over to a business credit card.

Loan Type Property LTV of 80% Net Rent
DSCR $312K $250K $1,800
Credit Score Interest Rate Monthly Payment Can it Qualify?
680 8.8% $1,976 No
760 7.45% $1,740 Yes

Learn this magic trick today! 

Business credit cards are an excellent way to separate business expenses from your personal accounts. These credit cards are easy to get and work the same as personal credit cards. By moving expenses over to business credit cards, it wipes the charges off of your personal credit completely. As a result, your credit score, cash flow, and ability to qualify will all increase. 

We are here to help!

Here at The Cash Flow Company we are here to help you get on the right path. Do you need to get your credit card debt off of your personal credit report? Contact us today to find out more about usage loans and how they can set you up for long term financing. Just to clarify, the usage loan is a private loan that does not show up on your credit for 60 to 90 days and won’t affect your DTI. Now is the time to set yourself up for success! 

Watch our most recent video Help! I Can’t Get a DSCR Loan Because of My Credit to find out more.

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DSCR Loan Options: Interest-Only

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DSCR Loan Options: Interest-Only

Today we are going to explore the interest only DSCR loan option. It is important that people look at all of their options when they are searching for a DSCR loan in order to find the best one for your property. While rents are increasing, they are thankfully not increasing very fast. However, rates are still high and are falling between 7 and 8. These are the times when you really need to work your numbers and products in order to find the right DSCR loan for your rental property.  

Are you above the break even point for DSCR ratios?

A DSCR loan has always been a 30 year product, meaning that it is amortized over 30 years. However, there are other options out there that will typically give you the benefit of qualifying. Here at The Cash Flow Company, we typically see people who are just below the break even point on DSCR ratios. Just to clarify, the break even point on DSCR ratios is normally 1 or 1.1 depending on the lender. 

How do you change the numbers in your favor?

Many investors are wondering how they can change their numbers even when rents, taxes, and insurance are not going to change. In order to make an impact on your numbers you are going to have to change your interest rate, look at interest only loans, or find a 40 year product. By looking outside of the typical 30 year box, you will be able to find a number that fits your property. 

Let’s look at an interest only loan.

An interest only DSCR loan means that you are only paying the interest on the property for a period of time during that loan. Normally these loans are available for 5, 7, or 10 years. While you’re not paying down on the property, you are instead creating the cash flow you need to qualify. 

Loan amount $250K
Net Rent $1,725
Interest only loan 7.65%
Monthly payment $1,594
Break even point (Rents – Monthly payment) + $131

On this property, the expenses are under the break even point by $131. For an interest only loan this property would qualify because it is cash flowing. 

Set yourself up for success.

There is no reason to get into real estate investing unless you are creating wealth by creating cash flow. Just to clarify, creating wealth is setting yourself up for long term success, while cash flow is what you are creating right now. It is important that you not only look at making the right moves now, but also understand how everything will line up for the future. For example, a property that was purchased for $25K 20 years ago is now worth $400K. There is a lot of money to be made in real estate investing. Set yourself up for success by going through the numbers and focusing on finding the best product. 

There is a downside.

By using an interest only loan or an amortized loan you will be paying it down slower. However, over time the property will go up in value. This helps to balance things back out when the time comes to sell the property. In these different times you have to use different strategies in order to be successful. For example, when rates are a little higher, you need to find a product that will break even or better yet cash flow. When the rates go back down you can then refinance it and get a better payment. Keep in mind that  what may appear as a downside now, could be beneficial later as long as the property breaks even.

Start looking for the best product for you!

Now is the time to look into different products to see which is best for you and your property. By using an interest only DSCR loan you will create the cash flow you need to succeed. Here at The Cash Flow Company we want to help you find the best product for you! Contact us today to walk through the numbers.

Watch our most recent video to find out more about DSCR Loan Options: Interest-Only

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How to Make a DSCR Loan Work for Your Rental Property

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How to Make a DSCR Loan Work for Your Rental Property

It is important that people look at all of their options when they are searching for a DSCR loan. While rents are increasing, they are thankfully not increasing very fast. However, rates are still high and are falling between 7 and 8. These are the times when you really need to work your numbers and products in order to find the right DSCR loan for your rental property.  

Are you above the break even point for DSCR ratios?

A DSCR loan has always been a 30 year product, meaning that it is amortized over 30 years. However, there are other options out there that will typically give you the benefit of qualifying. Here at The Cash Flow Company, we typically see people who are just below the break even point on DSCR ratios. Just to clarify, the break even point on DSCR ratios is normally 1 or 1.1 depending on the lender. 

How do you change the numbers in your favor?

Many investors are wondering how they can change their numbers even when rents, taxes, and insurance are not going to change. In order to make an impact on your numbers you are going to have to change your interest rate, look at interest only loans, or find a 40 year product. By looking outside of the typical 30 year box, you will be able to find a number that fits your property. 

Let’s look at a 30 year loan:

DSCR expenses include your principle, interest, taxes, insurance, flood insurance, and HOA. These can also be referred to as your expenses for the property.

Today we are just going to focus on principal and interest, or your Net Rent. 

Loan amount $250K
Net Rent $1,725
30 year loan 7.65%
Monthly payment $1,774
Break even point (Rents – Monthly payment) -$50

On this property, the expenses are $50 over the break even point. For a 30 year product, this property would not qualify.

Let’s look at an interest only loan.

Just to clarify, interest only means that you are only paying the interest on the property for a period of time during that loan. Normally these loans are available for 5, 7, or 10 years. While you’re not paying down on the property, you are instead creating the cash flow you need to qualify. 

Loan amount $250K
Net Rent $1,725
Interest only loan 7.65%
Monthly payment $1,594
Break even point (Rents – Monthly payment) + $131

On this property, the expenses are under the break even point by $131. For an interest only loan this property would qualify because it is cash flowing. 

Let’s look at a 40 year loan.

A 40 year loan is an amortized loan, which just means that it takes longer to pay off. 

Loan amount $250K
Net Rent $1,725
40 year loan 7.65%
Monthly payment $1,673
Break even point (Rents – Monthly payment) + $52

The difference between a 30 year loan and a 40 year loan on this property is  $101. 

Set yourself up for success.

There is no reason to get into real estate investing unless you are creating wealth by creating cash flow. Just to clarify, creating wealth is setting yourself up for long term success, while cash flow is what you are creating right now. It is important that you not only look at making the right moves now, but also understand how everything will line up for the future. For example, a property that was purchased for $25K 20 years ago is now worth $400K. There is a lot of money to be made in real estate investing. Set yourself up for success by going through the numbers and focusing on finding the best product. 

There is a downside.

By using an interest only loan or an amortized loan you will be paying it down slower. However, over time the property will go up in value. This helps to balance things back out when the time comes to sell the property. In these different times you have to use different strategies in order to be successful. For example, when rates are a little higher, you need to find a product that will break even or better yet cash flow. When the rates go back down you can then refinance it and get a better payment. Keep in mind that  what may appear as a downside now, could be beneficial later as long as the property breaks even.

Building your foundation.

Here at The Cash Flow Company we want to help you qualify! By using this next example, you could not only have the opportunity to get into one property, but build your investment future. Real estate investing is truly one of the most reliable forms of investment. It is a long term investment with excellent opportunities to create wealth.

Let’s look at buying down your rate.

Buying down your rate means that you are paying an extra point, which is 1% of your loan to the lender in order to get a better rate. A better rate would be a better payment, and which would allow you to qualify.

Loan amount $250K
Net Rent $1,725
Pay down interest (1%)  7.35%
Monthly payment  $1,722
Break even point (Rents – Monthly payment) $3 under

While there is not much cash flow right now, it does allow investors to get into the property and creates an opportunity to build a asset. 

Start looking for the best product for you!

Now is the time to look into different products in order to see which is best for you and your property. Regardless of whether it’s a 30 year loan, interest only loan, 40 year loan, or a buy down, you have a lot of options available.  Here at The Cash Flow Company we want to help you find the best product for you! Contact us today to walk through the numbers.

Watch our most recent video How to Make a DSCR Loan Work for Your Rental Property to find out more! 

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What Documents Do I Need for a DSCR Loan?

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What Documents Do I Need for a DSCR Loan?

Today we are going to discuss what documents are needed for a DSCR loan. DSCR has really been taking off in the last 6 months! As rates continue to come back down and properties start to cash flow again, many investors are coming back to DSCR. It is an excellent product for real estate investors to use for their next property! 

What kind of documents do you need when you are applying for a DSCR loan?

If you are doing a refinance, you will need:

  1. Lease agreement – What are you leasing?
  2. Business setup – What is the operating agreement and who runs the company?
  3. Reserves – You need a couple months of bank statements that show 2-3 months of reserves.
  4. Taxes – Needed for DSCR ratio.
  5. Insurance: Needed for DSCR ratio.
  6. HOA – Needed for DSCR ratio.
  7. Flood – Needed for DSCR ratio.
  8. Title 
  9. Appraisal – An appraisal will show the value of the property.

Once you have the appraisal and everything you need for the DSCR, it normally takes 2 to 3 weeks before everything is finalized.

There is something for everyone!

DSCR loans have become more mainstream and there are a lot of options available to fit your investment needs. It is important to have all of your documents ready to go before starting the DSCR loan process to get everything finalized quickly. Whether you have a commercial, 5 unit, or a rural property, DSCR can open the door to endless opportunities! Do you have a unique rental property and are looking for more lending options? If so, contact us today to find out more about DSCR loans and how you can get under the DSCR umbrella! 

To find out more about DSCR loans and calculate your DSCR ratio contact us today!

Watch our most recent video to answer the question “What Documents Do I Need for a DSCR Loan”.

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Discover the #1 KEY to DSCR and BRRRR

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Discover the #1 KEY to DSCR and BRRRR

Today we are going to review BRRRR and DSCR in order to discover the #1 Key to your success. While DSCR and BRRRR are excellent products by themselves, when used correctly together, you can have the cash flow you need to create generational wealth. Let’s take a quick recap of what DSCR and BRRRR are before combining them!

What is BRRRR?

BRRRR is a popular real estate investment strategy that stands for buy, repair, rent, refinance, and repeat. In order to buy the property, investors use a short-term loan such as hard money or private money. Once the property is purchased, investors repair the property in order to add more value and make it worth more. After repairs are completed, the property can then be rented out and investors can refinance the property. The refinance provides an excellent opportunity to get into a cheaper long-term loan, such as a DSCR. Finally, repeat the process again and again in order to create generational wealth.

What is a DSCR loan?

A DSCR loan is a real estate loan that is geared towards rental properties. This type of loan focuses on income versus expenses. As a result, the more a property cash flows, the better! 

Let’s put BRRRR and DSCR together!

The #1 rule that you must follow when using BRRRR and DSCR together is that you do NOT buy first! Instead, you need to plan your refinance. This begins by checking your numbers! If you have an income of $1,400 and expenses of $1,300, then you would have a DSCR ratio of 1.08. It is important that you always ask yourself whether or not you will break-even. If the answer is no, then you will not qualify for a DSCR loan.

Is it really a good deal?

Again, you need to determine if the property will break even or not. If not, then you will get stuck in an expensive short-term loan when the time comes to refinance the property. Those who can’t refinance will also begin to see their profits disappear. Investors who take their time and know their numbers will hit the bullseye! Remember, cash flow is key! Properties that cash flow will qualify for a DSCR loan. 

Do you have a property in mind? Do you need help with your numbers? Give us a call today and we will walk you through the steps to ensure your success!

Watch our most recent clip to Discover the #1 KEY to DSCR and BRRRR

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How Your DSCR Ratio and BRRRR Work Together

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How Your DSCR Ratio and BRRRR Work Together

Today we are going to talk about how your DSCR ratio and BRRRR work together. Just to clarify, BRRRR stands for buy, repair, rent, refinance, and repeat. The main purpose of BRRRR is to get into properties using little to no money out of your pocket. Here at The Cash Flow Company we are averaging 10 to 15 calls a day regarding the fundamentals. This includes knowing where to start, what you need to do, and how to be successful. In order to be successful, it is imperative that you go over the numbers first to make sure that you are getting into a good property. 

Two loans, one goal!

With BRRRR you need one loan for the purchase and repair, plus a long term loan for the refinance. The short term loans are often a hard money loan or a private loan ranging from 10% to 12% interest rates. It is important to keep in mind that these loans are only temporary, lasting 6 to 12 months. After that time, the loan balloons. That is why it is so important to have a long term loan option available when using the BRRRR strategy. Unfortunately,  many people do not do the research up front or run through the numbers before making the purchase. Don’t wait until the refinance! Take a look ahead to make sure that the property you want to buy will be able to cash flow later on. 

What is a DSCR loan and how can it work with BRRRR?

A DSCR loan is based solely on the property and your credit score. If the property’s income or rents are not very high, then you’re not going to get that big of a loan. The lenders will decrease the LTV until the break even point or sometimes higher. In the end, the lenders need the income and the expenses to be the same. This is referred to as the DSCR ratio. Just to clarify, expenses include the monthly payments, taxes, insurance, HOA, and flood insurance. One thing to keep in mind is that the LTV is different for each person and for each property. In the end you need to determine if your expenses equal your income prior to purchasing the property. 

For example:

An investor is using a DSCR and buys something where the purchase, rehab, and everything puts them at 80%. However, the property itself only qualifies for 70% because of its break even point. While many think that they are good because they bought it and are into it for 75% to 80%, this is not always true. When it comes to refinancing the property, lenders can only do 70% to 75%. It is confusing and often daunting because there are so many moving parts. However, by laying it out and making sure that the property cash flows, you will be successful.

We are here to help!

Here at The Cash Flow Company, we are happy to run through the numbers with you to make sure that you are setting yourself up for success. That would include checking your rents, taxes, insurance, and LTV to make sure that you would qualify for a long term loan in the future. Start by making sure you know what your DSCR ratio is and how it can work with the BRRRR strategy. 

Contact us today to see if a DSCR loan and the BRRRR strategy are right for you!

Watch our most recent video DSCR Loans and BRRRR Properties – Fundamentals Explained to learn more!

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DSCR Loans and Multiplexes

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DSCR Loans and Multiplexes

Over the last 6 months DSCR has really been taking off! Today we are going to talk about DSCR loans and multiplexes. As rates continue to come back down, it will increase the cash flow for properties. This is why many investors are coming back to DSCR loans. It is an excellent product for real estate investors to use for their next multiplex property!

Can you get a DSCR loan for more than 4 units?

Typically there is a lending box that you fit into when you own a 1 to 4 unit. As a result, those who have 1 to 4 units have a lot of loan options available. We have had a lot of questions regarding lending options for properties that are not in that range. Anything over 5 units is considered a commercial property. Here at The Cash Flow Company we are working with a few investors who have an 8 plex, 12 plex, and even a 24 plex. For these customers, there are DSCR options, however they are considered commercial loans. Commercial loans are just a little bit different, but there are more options available now then there were in the past.  

There is something for everyone!

DSCR loans have a lot of options available to fit your investment needs. Whether or not you have a break even property, or one that is struggling to cash flow, there is something for everyone. DSCR is becoming more of a mainstream option for investors. What types of properties are growing in DSCR popularity? The answer is commercial, 5 units, rural properties and many others. These properties no longer have to fit in the lending box. DSCR is opening the doors to endless possibilities. Do you have a unique rental property and are looking for more lending options? If so, contact us today to find out more about DSCR loans and how you can get under the DSCR umbrella! 

To find out more about DSCR loans and calculate your DSCR ratio contact us today!

Watch our most recent video about DSCR Loans and Multiplexes to find out more!

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DSCR and BRRRR: The importance of refinancing

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DSCR and BRRRR: The importance of refinancing

Today we are going to talk about the importance of refinancing when using a DSCR loan and BRRRR strategy.  Here at The Cash Flow Company we are averaging 10 to 15 calls a day regarding the fundamentals. This includes knowing where to start, what you need to do, and how to be successful. In order to be successful, it is imperative that you go over the numbers first to make sure that you are getting into a good property. In doing so, investors can then determine if the property is a profitable investment. 

What is the BRRRR strategy?

What exactly is BRRRR? BRRRR stands for buy, repair, rent, refinance, and repeat. The main purpose of BRRRR is to get into properties using little to no money out of your pocket. Those who use this strategy correctly will be able to accumulate “value at” properties quickly and create a portfolio. Just to clarify, “value at” properties are those that are under market value and need work done. These are often hoarder houses, in need of yard cleanup, and ones that need maintenance or repairs. Whether the current owners were unable or unwilling to fix up the property, it creates the perfect opportunity for investors. By taking the time to fix up the properties, you will in turn create net worth for the property.

Two loans, one goal!

With BRRRR you need one loan for the purchase and repair, plus a long term loan for the refinance. The short term loans are often a hard money loan or a private loan ranging from 10% to 12% interest rates. It is important to keep in mind that these loans are only temporary, lasting 6 to 12 months. After that time, the loan balloons. That is why it is so important to have a long term loan option available when using the BRRRR strategy. Many investors use a DSCR loan for their long term loan because it is based solely on the property and their credit score. One thing to keep in mind is that the LTV is different for each person and for each property. In the end you need to determine if your expenses equal your income prior to purchasing the property. Unfortunately,  many people do not do the research up front or run through the numbers before making the purchase. Don’t wait until the refinance! Take a look ahead to make sure that the property you want to buy will be able to cash flow later on. 

Look ahead to ensure success.

One of the most important pieces of the BRRRR strategy is refinance. A refinance is needed so that you can carry the loan long term. While buying the right property is important, it is crucial that you look ahead and understand the importance of refinancing. Oftentimes investors get to the refinance and either can’t get a loan or they can’t get enough money to cover their costs. In either case, it would defeat the purpose of using the BRRRR strategy. By doing the research up front and making sure that the whole thing works, you will actually make money. A lot of people don’t take the time to work through the numbers. Instead they discover during the refinance closing that they are going to lose money.

What is a DSCR loan and how can it work with BRRRR?

A DSCR loan is based solely on the property and your credit score. If the property’s income or rents are not very high, then you’re not going to get that big of a loan. The lenders will decrease the LTV until the break even point or sometimes higher. In the end, the lenders need the income and the expenses to be the same. This is referred to as the DSCR ratio. Just to clarify, expenses include the monthly payments, taxes, insurance, HOA, and flood insurance. One thing to keep in mind is that the LTV is different for each person and for each property. In the end you need to determine if your expenses equal your income prior to purchasing the property. 

For example:

An investor is using a DSCR and buys something where the purchase, rehab, and everything puts them at 80%. However, the property itself only qualifies for 70% because of its break even point. While many think that they are good because they bought it and are into it for 75% to 80%, this is not always true. When it comes to refinancing the property, lenders can only do 70% to 75%. It is confusing and often daunting because there are so many moving parts. However, by laying it out and making sure that the property cash flows, you will be successful.

We are here to help!

Here at The Cash Flow Company, we are happy to run through the numbers with you to make sure that you are setting yourself up for success. That would include checking your rents, taxes, insurance, and LTV to make sure that you would qualify for a long term loan when you go to refinance. Don’t chance being surprised at the refinance closing! Take the time now to run through the numbers and ensure your success for the future! 

Contact us today to see if a DSCR loan and the BRRRR strategy are right for you!

Watch our most recent video to learn more about DSCR and BRRRR: The importance of refinancing.

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DSCR Loans: Top 3 Questions Everyone Is Asking

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DSCR Loans: Top 3 Questions Everyone Is Asking

DSCR has really been taking off in the last 6 months! Today we are going to talk about the top 3 DSCR loan questions everyone is asking. As rates continue to come back down and properties start to cash flow again, many investors are coming back to DSCR. It is an excellent product for real estate investors to use for their next property!

First, can you get a DSCR loan for more than 4 units?

Typically there is a lending box that you fit into when you own a 1 to 4 unit. As a result, those who have 1 to 4 units have a lot of loan options available. We have had a lot of questions regarding lending options for properties that are not in that range. Anything over 5 units is considered a commercial property. Here at The Cash Flow Company we are working with a few investors who have an 8 plex, 12 plex, and even a 24 plex. For these customers, there are DSCR options, however they are considered commercial loans. Commercial loans are just a little bit different, but there are more options available now then there were in the past.  

Second, what kind of documents do you need when you are applying for a DSCR loan?

If you are doing a refinance, you will need:

  1. Lease agreement – What are you leasing?
  2. Business setup – What is the operating agreement and who runs the company?
  3. Reserves – You need a couple months of bank statements that show 2-3 months of reserves.
  4. Taxes – Needed for DSCR ratio.
  5. Insurance: Needed for DSCR ratio.
  6. HOA – Needed for DSCR ratio.
  7. Flood – Needed for DSCR ratio.
  8. Title 
  9. Appraisal – An appraisal will show the value of the property.

Once you have the appraisal and everything you need for the DSCR, it normally takes 2 to 3 weeks before everything is finalized.

Third, what happens if the property doesn’t break even?

The DSCR ratio is what everything is based on. The DSCR ratio is the breakeven point where the rents equal the expenses on that property. Just to clarify, expenses include your payments (principle and interest), taxes, insurance, HOA, and flood insurance. When the rents are equal to the expenses, there is a DSCR ratio of 1. If the property is not cash flowing, then the DSCR ratio will be less than 1. While there are still options available for investors whose ratio is less than 1, it is often at a higher interest rate and lower LTV. There are options for no income as well that will go down to 75%, while other lenders might not even check income. 

There is something for everyone!

DSCR loans have a lot of options available to fit your investment needs. Whether or not you have a break even property, or one that is struggling to cash flow, there is something for everyone. DSCR is becoming more of a mainstream option for investors. What types of properties are growing in DSCR popularity? The answer is commercial, 5 units, rural properties and many others. These properties no longer have to fit in the lending box. DSCR is opening the doors to endless possibilities. Do you have a unique rental property and are looking for more lending options? If so, contact us today to find out more about DSCR loans and how you can get under the DSCR umbrella! 

To find out more about DSCR loans and calculate your DSCR ratio contact us today!

Watch our most recent video DSCR Loans: Top 3 Questions Everyone Is Asking to find out more!

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