Investor Cash Flow- DSCR Loans

Key features

• Focus on property cash flow: Unlike traditional mortgages, where a borrower's income, employment history, and tax returns are reviewed for qualification, DSCR loans prioritize the property's ability to generate enough rental income to cover the projected monthly mortgage payment.
• Calculating DSCR. This ratio compares a property's gross Operating Income to its total debt service - mortgage payments including real estate taxes, insurance and any HOA. DSCR loans normally generate more income than the monthly debt service but some investors will allow a negative cash flow with compensating factors.
• Benefits for investors: This loan structure is particularly beneficial for real estate investors who may not qualify for traditional financing or desire to streamline the paperwork involved in qualification due to:
  • Fluctuating or non-traditional income sources (self-employed individuals, freelancers, etc.).
  • Operating under a business entity (like an LLC) for liability protection and wanting to keep personal and business finances separate.
  • Desire to scale their rental portfolio, as DSCR loans often have no limit on the number of properties that can be financed.
  • Needing faster funding and a streamlined application process, as DSCR loans require less personal income documentation.
• Property requirements: DSCR loans are generally for investment properties, such as:
  • Single-family rentals
  • Multi-unit properties
  • Commercial real estate
  • Short-term or long-term rentals

DSCR loans offer a flexible and accessible financing solution for real estate investors focused on building income-generating portfolios. They cater to investors with varying income structures and those who prioritize the financial performance of their properties over personal income when seeking loan approval. These loans offer distinct advantages in terms of qualification and scalability.