Possible to get DSCR for rental and sell home early

Riverside, California
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Possible to get DSCR for rental and sell home early

Khu Far
Member since 2024 · 4 posts · 9 votes

Is it possible to get a DSCR loan for a SFH that you rent for 1 year and then be able to sell it and take the profit to reinvest?

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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 667 votes
    2y

    Just dont take on a PPP if you plan to sell.  PPP - Pre Payment Penalty.

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  • AJ ExnerPro Member
    Lender · Springfield, MO · Member since 2023 · 656 posts · 318 votes
    2y
    Quote from @Khu Far:

    Is it possible to get a DSCR loan for a SFH that you rent for 1 year and then be able to sell it and take the profit to reinvest?


    Khu,

    There are a few ways of doing it. You could either purchase it with a stabilized bridge loan which usually requires 25% down payment. Or you could find a group with a 30 year fixed (or Adjustable Rate) with reduced or removed Prepayment Penalty, but they will usually charge extra points or a higher rate to do it.

    Not 100% sure on the strategy behind it, but would be happy to connect and talk through either.

    Good luck!

    [email protected]417-427-2612
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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Khu Far:

    Is it possible to get a DSCR loan for a SFH that you rent for 1 year and then be able to sell it and take the profit to reinvest?


    I do not believe a DSCR loan would be beneficial for this scenario unless you plan to keep it longer than 3 years.

    You are better off buying with a bridge loan, since you will not have a PPP

    Although you could opt for a DSCR with no PPP, the rate will be similar to a bridge and/or the fees may be higher with a reduced PPP. It will also be much faster to close on a bridge than a DSCR loan.

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  • Tanner Lewis
    Lender · Austin, TX · Member since 2021 · 448 posts · 441 votes
    2y

    If you plan to exit a deal with a 1 year exit strategy, it makes sense to not have a prepayment penalty on the deal. A prepayment penalty buys down your rate for you without you having to contribute more points at closing. This means with no prepay, you will have a higher rate, but this makes sense if you plan to sell the property in a short time frame. 

    Another option would be to go with a hard money loan with a 1 year term. There are no prepayments on these, and the underwriting process is a lot quicker, but you will be paying a higher rate than a DSCR loan. Many options out there, it just depends on what best suits your needs.

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  • Dallas Sauer
    Lender · Phoenix Arizona · Member since 2018 · 89 posts · 51 votes
    2y
    Quote from @Khu Far:

    Is it possible to get a DSCR loan for a SFH that you rent for 1 year and then be able to sell it and take the profit to reinvest?


    We have DSCR with 1 year prepayment penalties for this very reason. It can be a cheaper option than a Bridge at a 10+ rate or a normal 5 or 3 year PPP and if you don't sell it is still a full term loan.

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  • Ammabelle Canoy
    Member since 2024 · 33 posts · 3 votes
    2y

    hi, yes. you can do that. oftentimes when clients want to do this we just lower the pre pay penalty for them

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