DSCR loans in Appreciating Markets (High Cost of Living)
Has anyone succesfully gotten a DSCR loan on a SFR in an appreciating market (high cost of living), i.e. Bay Area, Los Angeles?
The DSCR loan is predicated on the cash flow covering the debt service, but that seems very unlikely in areas with low or no cash flow.
I can see DSCR loans working in the midwest, but not on the west coast. Am I wrong or?
Quote from @Kevin Arceo:
Has anyone succesfully gotten a DSCR loan on a SFR in an appreciating market (high cost of living), i.e. Bay Area, Los Angeles?
The DSCR loan is predicated on the cash flow covering the debt service, but that seems very unlikely in areas with low or no cash flow.
I can see DSCR loans working in the midwest, but not on the west coast. Am I wrong or?
You can get them, you just need a larger down payment.
Quote from @Kevin Arceo:DSCR is underwritten off of rents. If it’s a STR, some programs all airdna so it more than covers PITI even in west coast markets.
Has anyone succesfully gotten a DSCR loan on a SFR in an appreciating market (high cost of living), i.e. Bay Area, Los Angeles?
The DSCR loan is predicated on the cash flow covering the debt service, but that seems very unlikely in areas with low or no cash flow.
I can see DSCR loans working in the midwest, but not on the west coast. Am I wrong or?
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@Chris Seveney is correct DSCR works but to cash flow you need a large down payment
The Coastal western states the rents have not caught up with values. Inland can work with lower down payments as rents meet the PITI
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You can't get it if you're property doesn't cash flow. Some DSCR lenders allow for STR rental numbers, that could end up qualifying your property.
We got one in Richmond last Spring/Summer 2022.
Your rent needs to normally EXCEED your mortgage, insurance, and taxes. If you can do that you can get up to 70%-75% of the LTV especially if you have a really good lender like we do.
Normally it works in lower cost areas like the East Bay Oakland/ Richmond/ Antioch/Pittsburg /Concord. Our purchase price was more than 40% below ARV at the time.
We see people doing it all the time getting these loans in the Bay Area on good deals.
People that think making 2-4 offers on properties on the mls are going to get steal are going to be extremely disappointed.
You will need to purchase the property at a discount of at least 15-20%. It's not everyday but if you put a lot of serious work and effort into finding a rental (15-20 hours per weeks) and at least write 2-3 offers per month for a year or 1.5 years, it's definitely possible.
If you need a connection for a lender or eviction attorney feel free to dm me.