Tag Archive for: DSCR loans

The Best Way to Find a DSCR Loan For Your Investment

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The Best Way to Find a DSCR Loan For Your Investment

Today we are going to discuss the best way to find a DSCR loan for your investment property. Unlike Fannie and Freddie, or traditional lenders, DSCR loans do not have the same guidelines. Instead, DSCR loans are regulated by a few big investors and do not force people to fit into a computerized box. This creates the opportunity for investors to find the perfect loan to meet their needs. What is the best way to find a DSCR loan? Let’s take a closer look.

Every lender is different.

Every DSCR lender is different and they each have their own guidelines that they follow. While a lot of lenders will only do 1 to 4 units, others will be more adventurous and do commercial properties.  For these lenders, you either fit in their box or you don’t. All DSCR lenders are not the same, they don’t always look the same, and most importantly they are not priced the same. It is important to keep this in mind when you are looking and shopping for DSCR loans.  Shopping around for the best loan to fit your needs is especially important if you have something unique. 

What to look for?

Keep in mind all of your options when looking at DSCR loans. This includes the pricing, rules, and regulations, which can vary depending on the lender. Here at The Cash Flow Company we have between 7 and 10 different places that we work with for DSCR loans. That is because not every DSCR loan type will fit in every lender’s box. For example, we are doing a portfolio for a customer who has a 12 plex, 4 plex, and a couple single family properties. The borrower only wants one loan. Another customer is doing 3 single family properties, but two are very unique situations. One is a pad split, another is a contract for a deed. Our goal for both customers is to find a lender that can do all of these properties in one loan. By finding the right DSCR lender, the sky’s the limit to your success.

We are here to help!

Are you in need of a DSCR loan for a unique property? Here at The Cash Flow Company we are happy to run through the numbers to see which loan is best for you. Most importantly, there is no need to run your credit! Don’t get stressed trying to fit into a lending box! Keep your options open and find the right DSCR lender today! 

Contact us today to find out more about DSCR loans! 

Watch our most recent video about: “The Best Way to Find a DSCR Loan For Your Investment” 

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DSCR Loans: What Type of Properties Qualify?

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DSCR Loans: What Type of Properties Qualify?

Today we are going to discuss DSCR loans and look at what type of properties qualify. DSCR loans are an excellent product because they can provide more flexibility than traditional lenders. Unlike Fannie and Freddie, or traditional lenders, DSCR loans do not have the same guidelines. Instead, DSCR loans are regulated by a few big investors and do not force people to fit into a computerized box. DSCR loans create an opportunity for investors to find the perfect loan to meet their needs. 

Unique properties require unique loans.

Many unique properties include ones that need a smaller loan, a rural loan, mixed use, or properties that are above 4 units.  Keep in mind that some lenders are not always able to meet your needs. Unlike traditional loans, DSCR lenders all follow different guidelines and requirements. While one will do a DSCR ratio of 1, another lender will require 1.1 to get their best rates. Your credit score also plays a role in loan approval. Some lenders will go down to a 620 credit score, while others will say that 680 is the lowest they will go. There are so many different options that are available to investors. Be sure to take your time to find the best option for you and your property.  

The lending box.

There is a lending box that 60% to 70% of investors fit into. This box requires them to have a 700 credit score, 75% LTV, and a 1 to 4 unit property. For these investors, it becomes a matter of price shopping to see which lender has the best price for their property. If you don’t fit into this box don’t worry! There are a multitude of loan options available that can provide the flexibility you need to succeed. Do you have a VRBO, Airbnb property, pad rental, or a rural property? Find the right loan and the right amount for your next investment project. Whether it’s $50K or $300K, DSCR lenders have the versatility that can open the door to endless possibilities.

We are here to help!

Are you in need of a DSCR loan for a unique property? Here at The Cash Flow Company we are happy to run through the numbers to see which loan is best for you. Most importantly, there is no need to run your credit! Don’t get stressed trying to fit into a lending box! Keep your options open and find the right DSCR lender today! 

Contact us today to find out more about DSCR loans! 

Watch our most recent video to find out more about: DSCR Loans: What Type of Properties Qualify?

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DSCR Loans: How Flexible Are the Rules and Guidelines?

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DSCR Loans: How Flexible Are the Rules and Guidelines?

Many investors wonder how flexible the rules and guidelines are for DSCR loans. Do all DSCR lenders have the same guidelines or follow universal rules? The answer is no! Unlike Fannie and Freddie, or traditional lenders, DSCR loans do not have the same guidelines. Instead, DSCR loans are regulated by a few big investors and do not force people to fit into a computerized box. This creates the opportunity for investors to find the perfect loan to meet their needs. 

Every lender is different.

Every DSCR lender is different and they each have their own guidelines that they follow. While a lot of lenders will only do 1 to 4 units, others will be more adventurous and do commercial properties.  For these lenders, you either fit in their box or you don’t. All DSCR lenders are not the same, they don’t always look the same, and most importantly they are not priced the same. It is important to keep this in mind when you are looking and shopping for DSCR loans.  Shopping around for the best loan to fit your needs is especially important if you have something unique. 

Unique properties require unique loans.

Many unique properties include ones that need a smaller loan, a rural loan, mixed use, or properties that are above 4 units.  Keep in mind that some lenders are not always able to meet your needs. Unlike traditional loans, DSCR lenders all follow different guidelines and requirements. While one will do a DSCR ratio of 1, another lender will require 1.1 to get their best rates. Your credit score also plays a role in loan approval. Some lenders will go down to a 620 credit score, while others will say that 680 is the lowest they will go. There are so many different options that are available to investors. Be sure to take your time to find the best option for you and your property.  

The lending box.

There is a lending box that 60% to 70% of investors fit into. This box requires them to have a 700 credit score, 75% LTV, and a 1 to 4 unit property. For these investors, it becomes a matter of price shopping to see which lender has the best price for their property. If you don’t fit into this box don’t worry! There are a multitude of loan options available that can provide the flexibility you need to succeed. Do you have a VRBO, Airbnb property, pad rental, or a rural property? Find the right loan and the right amount for your next investment project. Whether it’s $50K or $300K, DSCR lenders have the versatility that can open the door to endless possibilities.

What to look for?

It is important to keep in mind all of the options available to you when looking at DSCR loans. This includes the pricing, rules, and regulations, which can vary depending on the lender. Here at The Cash Flow Company we have between 7 and 10 different places that we work with for DSCR loans. That is because not every DSCR loan type will fit in every lender’s box. For example, we are doing a portfolio for a customer who has a 12 plex, 4 plex, and a couple single family properties. The borrower only wants one loan. Another customer is doing 3 single family properties, but two are very unique situations. One is a pad split, another is a contract for a deed. Our goal for both customers is to find a lender that can do all of these properties in one loan. By finding the right DSCR lender, the sky’s the limit to your success.

We are here to help!

Are you in need of a DSCR loan for a unique property? Here at The Cash Flow Company we are happy to run through the numbers to see which loan is best for you. Most importantly, there is no need to run your credit! Don’t get stressed trying to fit into a lending box! Keep your options open and find the right DSCR lender today! 

Contact us today to find out more about DSCR loans! 

Watch our most recent video “DSCR Loans: How Flexible Are the Rules and Guidelines?” to find out more! 

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DSCR Loan Explained – Easy Rental Loan for Investors

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DSCR Loan Explained – Easy Rental Loan for Investors

Are you looking for a lightning fast easy loan for your rental properties? Something that comes with affordable, long term fixed rates? Then we have your solution. We call it the Easy Rental Loan that is for investors, but other lenders in the industry call it a DSCR loan. A DSCR is also known as a debt service coverage ratio loan, measures your ability to cash flow in order to pay your monthly costs. There are two key items that you need to know about the Easy Rental Loan for Investors. Let’s take a look.

Two key items:

  1. A decent credit score
  2. A lease that covers the monthly cost of your property

The Monthly costs include:

  1. Mortgage payment
  2. Property taxes
  3. Insurance
  4. HOA fee

Benefits for investors:

If your property positively cash flows, meaning that you are making more than you spend on the property, then you can qualify for an easy rental loan. Better yet, you can still qualify for good rates and a 30 year fixed term. 

What makes it Easy:

This is an amazing product for investors. Unlike traditional lenders you don’t have to worry about submitting tax returns, being in business for two or more years, or having too many financed properties. It really doesn’t get easier than that

Contact us today!

So if you’re looking for a fast, efficient, and easy solution to fund your rental properties, then look no further. We have the easy rental loan waiting for you.

Ready to chat? Great! Our team here at The Cash Flow Company is here to help. We are eager to set you on a path that helps you make the kind of money you need to live the life you want.

Watch our most recent clip to find out more about the Easy Rental Loan.

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Why You Should Buy Rental Properties Now

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Why You Should Buy Rental Properties Now

Investors are asking why they should buy rental properties with interest rates being so high. While no one has a crystal ball to see the future of interest rates, there is a market trend that many seasoned investors follow. They buy when rates are high, and then refinance when the rates drop again. In doing so, the seasoned investors put themselves ahead of the game. Consequently, by already having a property in hand, it takes the pressure off not having to rush into deals when rates drop. You too will be able to take advantage of the lower rates without scrambling to find properties. Below is an example of how cash flow is being affected by the current interest rates. Our focus is on the future. The ultimate goal is to buy now in order to create optimum cash flow later. 

DSCR Loan

Today we are going to dive into an example illustrating why purchasing rental properties now will increase your cash flow in just a few years when using a DSCR loan. What is a DSCR loan? A DSCR loan are loans focused on the rents from a rental property and the credit worthiness of the borrower. While the increasing interest rates are making it harder for investors to qualify for a DSCR loan, those who are able to find good properties will in turn set themselves up for success when rates go back down.  

Example:

$250K DSCR Loan 
Time Frame Percentage Expected Payment Change Over Time
Couple years ago 3.75% $1,158
Now 9% to 11% 

(depending on LTV)

 $2,011 $853 

Payment Increase 
In the Future 7% 

(you refinance $2,011 principle)

 $1,663 $348

Cash flow increase 
The Optimus  5%

(Looking if it dropped from 9% to 5%)

 $1,342 $669 

Cash flow increase 

What is a “good property” to buy now?

My suggestion for investors is that they need to find something that has good equity and at 25% to 30%. As long as it is breaking even, then in a year or two when rates go back down, you will be able to refinance to increase your cash flow without buying another property. The more affordable the homes are, the bigger the market becomes. The good news is that buyers are going to start buying again, and the values around you are going to increase. While no one can predict that the interest rates will go back down to 2.5% for owner occupied and 3.75% for investors, there are indications that interest rates will drop in 2024. 

What else can you do to succeed in this market?

You’re not alone! There are a lot of people who are questioning if they should buy now. Navigating this market can be overwhelming for many investors. By doing your research and investing wisely, you will not only increase cash flow, but create generational wealth as well. I will be doing a follow up video that will further show you the effect that interest rates have on cash flow. This will include a look from the buyers side, and how the market is going to push up your values. 

Watch our most recent video about why rental properties fail to cash flow and how you can set yourself up for success by investing now.

Do you have questions about DSCR loans or how you can create generational wealth? Contact us today!

 

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How Rising Interest Rates Impact Cash Flow

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How Rising Interest Rates Impact Cash Flow

Today we are going to look at an example of how rising interest rates impact cash flow for real estate investors who are using a DSCR loan. To clarify, a DSCR loan is a loan that focuses on the rents from a rental property and the credit worthiness of the borrower. In today’s market, the increasing interest rates are truly affecting payments and more importantly they are negatively impacting cash flow. 

Example:

$250K Loan 
Time Frame Percentage Expected Payment Change over Time
Couple years ago 3.75% $1,158
Now 9% to 11% 

(depending on LTV)

 $2,011 $853 

Payment Increase 
In the Future 7% 

(you refinance $2,011 principle)

 $1,663 $348

Cash flow increase 
The Optimus  5%

(Looking if it dropped from 9% to 5%)

 $1,342 $669 

Cash flow increase 

This example allows us to visualize why rental properties are failing to cash flow while using a DSCR loan. As a result to higher interest rates, investors are experiencing increasing payments for their properties. This is in addition to rising taxes, and increasing insurance expenses as well. As a result, investors are struggling to break even, let alone create cash flow. In sum, all of these pressures are making it harder to be successful in real estate investing. 

What’s next?

I will be doing a follow up video that will further show you the effect that interest rates have on cash flow. This will include a look from the buyers side, and how the market is going to push up your values. While we don’t have control over the interest rates, we can instead use this time to make the most of the market. By investing in undervalued properties now, you can then refinance when rates go down. This in turn will create the cash flow you need to succeed in the years to come.

Watch our most recent video about why rental properties fail to cash flow and how you can set yourself up for success by investing now.

Do you have questions about DSCR loans or how you can create generational wealth? Contact us today!

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DSCR Loan: Why Rental Properties Fail to Cash Flow

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DSCR Loan: Why Rental Properties Fail to Cash Flow

Today we are going to dive into an example illustrating why rental properties fail to cash flow using a DSCR loan. A DSCR loan are loans focused on the rents from a rental property and the credit worthiness of the borrower. In today’s market, the increasing interest rates are truly affecting payments and more importantly they are impacting cash flow. As a result, it has become harder and harder to qualify for a DSCR loan. Likewise, DSCR ratios are changing also. What used to be a 1:1 ratio (rents compared to expenses), has now increased depending on your LTV. Therefore, many investors can no longer qualify because there is no cash flow for the property. So, what does this look like numbers wise? Let’s take a closer look.

Example:

$250K Loan 
Time Frame Percentage Expected Payment Change Over Time
Couple years ago 3.75% $1,158
Now 9% to 11% 

(depending on LTV)

 $2,011 $853 

Payment Increase 
In the Future 7% 

(you refinance $2,011 principle)

 $1,663 $348

Cash flow increase 
The Optimus  5%

(Looking if it dropped from 9% to 5%)

 $1,342 $669 

Cash flow increase 

In this example it is clear to see why rental properties fail to cash flow, especially with a DSCR loan. The increasing rates have caused payments to increase as well. When combined with ever rising taxes and insurance expenses, investors are struggling to break even, let alone create cash flow. All of these pressures are making it harder to be successful in real estate investing. 

Why is it a good time to buy?

So, why is it a good time to buy? My suggestion for investors is that they need to find something that has good equity and at 25% to 30%. As long as it is breaking even, then in a year or two when rates go back down, you will be able to refinance to increase your cash flow without buying another property. The more affordable the homes are, the bigger the market becomes. The good news is that buyers are going to start buying again, and the values around you are going to increase.. While no one can predict that the interest rates will go back down to 2.5% for owner occupied and 3.75% for investors, there are indications that interest rates will drop in 2024. 

What’s next?

I will be doing a follow up video that will further show you the effect that interest rates have on cash flow. This will include a look from the buyers side, and how the market is going to push up your values. If you can find a good undervalued property now, then you are going to not only create cash flow, but create generational wealth as well. You’re not alone! There are a lot of people who are questioning if they should buy now. 

Watch our most recent video about why rental properties fail to cash flow and how you can set yourself up for success by investing now.

Do you have questions about DSCR loans or how you can create generational wealth? Contact us today!

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DSCR Loan Approval: E.L.F.F. Your Rental Properties

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What do you need to know about your DSCR loan so your investing is easy, lucrative, fun, and fast?

We want to give you the tools you need to win in the real estate game. 

In a recent article, we learned how lenders look at your credit score to determine the maximum loan they’ll offer. Today, we want to apply the same principles specifically to DSCR loans.

Some investors focus on fixing and flipping properties, while others create wealth through rentals. DSCR loans are one of the most useful tools for investors that are specifically designed for rental properties.

Understanding Leverage

Leverage is what we call using other people’s money. This typically comes in the form of bank loans, but it’s not limited to that.

Things like financial gifts, small loans from friends and family, your credit score, and loans from companies like Hard Money Mike can all give you leverage.

This leverage creates an equal playing field in the investing world. You don’t need to be wealthy to use leverage well.

Credit Score as Leverage

In this day and age, credit scores matter a lot. A good credit score is a powerful tool that you can use to increase your leverage.

We also sometimes talk about money buckets. Your ‘money bucket’ is the money you bring to the table. Obviously, if you’re a newer investor, your money bucket might not have as much personal money to fill it, in which case credit score matters even more.

However, strategically using your credit score, credit cards, business cards, HELOCs, etc. to fill your money bucket now is a great way to make sure you’re ready for future investing.

How Does Credit Score Impact a DSCR Loan?

DSCRs are investor-friendly loans. Banks calculate these loans based on the break-even point between the income of the property (rents) and the payments for that property (taxes, insurance, HOA, etc.). 

Let’s look at an example to see how credit score can impact your DSCR loans:

Once you subtract your expenses from the monthly rent, you’re left with $2,100. This means that, in order to maintain a DSCR ratio of 1 (the minimum to break even), you need a loan that has monthly payments of $2,100 or lower.

In the following example, Investor 1 has maintained a high credit score while Investor 2 has dipped below most banks’ minimum requirements.

In the two examples above, everything is the same except for the credit scores, and the effect is significant. Investor 2 can’t get a loan to refinance, and they’re either going to have to sell the property or keep their original loan for far longer than they wanted. 

Regardless, the person with the higher score is able to move through the investing process easily, lucratively, and quickly.

A bad credit score can tank your leverage and sabotage your investing by creating unnecessary roadblocks for your projects. 

How to Fix a Bad Credit Score

In the example above, Investor 2 struggled with a usage issue. This means that, even though they paid off their balance on time every month, excessive use of their personal credit card ended up driving down their score.

Here’s the deal: personal credit cards are not built to handle consistent real estate investing expenses. If you’re doing consistent real estate investing, we recommend looking into business credit cards.

Business cards often have higher usage limits which are ideal for the constant wear and tear of this industry.

You can also look into secured usage loans as a way to quickly boost your credit score.

Main DSCR Loan Takeaways

Leverage is king, and credit scores are an important piece of your leverage.

A good credit score makes it easier for you to qualify for and refinance your DSCRs. They can also help you put less money down on a property and increase your cash flow. 

Take care of your money buckets and credit score on the front end so you can succeed when deals come your way.

To help you get prepared, you can explore our website where we have free tools you can download to help you get organized, including a DSCR calculator and a business credit card marketplace.

If you’re interested in learning more about how you can E.L.F.F. your investing, feel free to reach out to us at Info@TheCashFlowCompany.com or fill out a contact card.

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How to Get a DSCR Loan in 3 Steps

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How to Get a DSCR Loan in 3 Steps

Getting a DSCR loan can be not only easy but rewarding as well. If you want to close a real estate deal fast and easy, simply follow these three simple steps. Begin by answering these questions, and you’ll be on your way to getting a loan that’s perfect for you and your cash flow.

Step 1: Check Your Rent Coverage

First, ask yourself: does your rent cover all your costs? This includes:

  • Mortgage payment
  • Taxes
  • Insurance
  • HOA fees

While it’s not always necessary, having your rent cover these costs can help you get better rates as well as higher loan-to-value products. At the very least, aim to charge rent that covers your monthly payments. However, if your rent does cover these costs, then you’ve passed the first step!

Example: Imagine you own a rental property. Your mortgage payment is $1,200, your taxes and insurance are $200, and your HOA fee is $100. Your total monthly cost is $1,500. If you charge $1,600 in rent, you cover all your costs and even make a little extra.

Step 2: Review Your Credit Score

Next, consider your credit score. You can get a DSCR loan with a score in the low 600s, but it will cost you more. Therefore a lower credit score can add up to one or more percentage points to your interest rate. This in turn can increase your monthly payment by $200 to $400.

Example: Let’s say you have a credit score of 620. You might get a loan with a 7% interest rate instead of 6%. On a $200,000 loan, that extra 1% could mean paying $2,000 more per year in interest.

If you need tips to raise your score, check out resources like our YouTube channel for advice on improving your credit.

Step 3: Choose the Right Lender

Finally, work with a lender who offers many options and programs. Every mortgage company has an ideal client, and you want to make sure your lender has an option that fits your needs at the lowest cost.

Example: You find a lender who offers various DSCR loan programs. One program might have a lower interest rate but higher fees, while another might offer a higher interest rate but lower closing costs. Choosing the right program can save you money and boost your monthly cash flow.

Conclusion

And that’s it! Those are the three key questions you need to answer before diving into a DSCR loan. If you find any step challenging, don’t worry. Our team is here to help you. We’re eager to set you on a path that helps you make the money you need to live the life you want.

Watch our most recent video to find out more about: How to Get a DSCR Loan in 3 Steps

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DSCR Loan – Is It Right For Your Real Estate Investment?

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DSCR Loan – Is It Right For Your Real Estate Investment?

What is a DSCR Loan?

A DSCR loan stands for Debt Service Coverage Ratio loan and is an excellent loan for real estate investment. It’s designed specifically for real estate investors. This type of loan helps you buy rental properties, whether they are long-term or short-term rentals. It’s not for flips or homes you plan to live in.

Why Choose a DSCR Loan?

Choosing a DSCR loan can be a smart move for several reasons:

  1. Easy Qualification: You don’t need to worry about how long you’ve been in business or your personal income. Even if you started your business yesterday, you could qualify.
  2. Focus on Property Income: The loan qualification is based on the income generated by the property, not your personal income.
  3. 30-Year Loan Options: You get a good 30-year loan product, which can provide stability and predictability.

How Does a DSCR Loan Work?

The key to a DSCR loan is that it focuses on the property’s ability to generate enough income to cover its expenses. Here’s how it works:

  1. Property Income: The income from the rental property should at least cover the mortgage, property taxes, insurance, and any HOA or flood insurance fees.
  2. Credit Score: Your personal credit score is important. The higher your score, the better the terms and rates.
  3. Loan-to-Value Ratio (LTV): This is the amount of the loan compared to the property’s value. Lower LTV means less risk for lenders and better terms for you.

Who Can Benefit from a DSCR Loan?

DSCR loans are perfect for:

  • New Investors: If you’ve just started your real estate investment journey, you can qualify even without a long business history.
  • Tax Savvy Investors: If you write off a lot of expenses on your taxes, which can reduce your reported income, this loan can still work for you.
  • Expanding Portfolios: Investors looking to add more rental properties can benefit from the flexible qualification criteria.

Example

Imagine you are an investor who just started a year ago. You found a great rental property, but traditional lenders won’t approve your loan because you don’t have two years of business income. A DSCR loan can help. As long as the rental income covers the mortgage and other expenses, you can get the loan and grow your investment portfolio.

Important Considerations

Before jumping into a DSCR loan, consider these factors:

  1. Prepayment Penalties: These loans often come with penalties if you pay them off early. Make sure to understand these terms before committing.
  2. Higher Interest Rates: DSCR loans can have slightly higher interest rates compared to traditional loans. This is because they are easier to qualify for.
  3. Not for Flips or Personal Use: These loans are strictly for rental properties, not for homes you plan to flip or live in.

Is a DSCR Loan Right for You?

If you’re a real estate investor looking for a flexible loan option that doesn’t rely heavily on your personal income, a DSCR loan could be the perfect fit. It’s especially useful if you’re new to the business or if you maximize your tax deductions. Always run the numbers and shop around for the best terms.

Get Started with a DSCR Loan Today

A DSCR loan is an excellent loan for real estate investors. Is it right for your investment needs? Contact us at The Cash Flow Company. We have the tools and expertise to help you understand your options and find the best loan for your needs.

Watch our most recent video to find out more about: DSCR Loan – Is It Right For Your Real Estate Investment?

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