What are good marlets

Question

Hey everyone so I am a brand new real estate investor just starting out looking to invest in long-term rentals and I need some insight, so I am recently self-employed for about seven months and I know I can't get a traditional loan due to me not having two years of self-employed tax return therefore I came across DSCR loan and Bank statement loans what are your guys's thoughts on those? I only have about 30K I can put towards a down payment and I know for those two types of loans I need 20% or more down payment. What are some markets that you guys recommend would be a good fit for me to find my first investment property do you guys have any advice or ideas that I should know about?

Melissa Justice · Answer

@Matheus Souza,

Welcome! You’re asking all the right questions early on. DSCR and bank statement loans can be great options for newer self-employed investors - the rates are typically a bit higher, but they allow you to qualify based on the property’s cash flow, not your tax returns.With around $30K to start, I’d look into Midwest markets like Akron and Canton, Ohio - both offer affordable entry prices, strong rental demand, and solid cash flow even after higher interest rates. You can still find quality single-family homes in the $130–150K range that meet DSCR criteria and get you positive cash flow right out of the gate.Start small, learn the process, and build from there - those markets are great training grounds for long-term investors! Always happy to share specific inventory or chat more about what's worked for other investors. Feel free to DM me.

Best of luck!

Joseph Tadres · Answer

Hey Matheus!

Congrats on being self-employed! I recommend the Midwest market because it has an affordable price point!

Drew Sygit · Answer

@Matheus Souza before you take the advice of most of the posters, please understand they're pointing you towards buying a Class C property!

Nothing wrong with that - IF you fully understand the risks involved and can persevere throught the inevitable challenges.

Read on for some copy & paste advice you hopefully find useful.

DM us if you prefer our transparent approach:)

-------------------------------------------------------------------------------------------------

How much do you know about Property Classes?

Recommend you spend some time learning about them, so you don’t mistakenly buy a property that will NEVER meet your expectations!

Why is Property Class so important for investors to understand and apply in their investing strategies?

Because the Property Class dictates the Class of the tenant pool that the property will attract.

The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.

Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.

The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood”.

Why is that important?

Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?

Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?

So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.

We use the following to rank Property Classes, in order of importance:

• Property Tenant Pool: closely linked to location, but not always.
• Property Location: closely linked to tenant pool, but not always.
• Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”

Key metrics for each Property Class:

Class A Properties:Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.Tenant Default: 0-5% probability of eviction or early lease termination.Section 8: Class A rents are too high and won’t be approved.Vacancies: 5-10%, depending on market conditions.Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

Class B Properties:Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.Tenant Default: 5-10% probability of eviction or early lease termination.Vacancies: 10-15%, depending on market conditions.Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.Section 8: Class B rents are usually too high for the Section 8 program.

Class C Properties:Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.Tenant Default: 10-20% probability of eviction or early lease termination.Section 8: Class C rents usually meet program requirements, proper screening still recommended.Vacancies: 10-20%, depending on market conditions and tenant screening.Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.Class D Properties:Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.Tenant Default: 20-30% probability of eviction or early lease termination.Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.Vacancies: 20%+, depending on market conditions and tenant screening.Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.

Where did we get our FICO credit score information from?

Check out this chart:

FICO Score

Pct of Population

Default Probability

800 or more

13.00%

1.00%

750-799

27.00%

1.00%

700-749

18.00%

4.40%

650-699

15.00%

8.90%

600-649

12.00%

15.80%

550-599

8.00%

22.50%

500-549

5.00%

28.40%

Less than 499

2.00%

41.00%

Source: Fair Isaac Company

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying.

Horror Stories:

https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-pain

https://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-loss

https://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costs

https://www.biggerpockets.com/forums/963/topics/1195280-experience-of-oos-investing-in-cleveland-after-15-years

Jimmy Lieu · Answer

Hey Matheus, welcome to BiggerPockets and congrats on starting your investing journey! You’re right—traditional loans are tough when you’re newly self-employed, so DSCR and bank statement loans can definitely be good options to look into since they focus more on property income or cash flow instead of your personal income history. They come with slightly higher rates and down payment requirements, but for investors in your situation, they can be a great way to get started. In terms of markets, I’d highly recommend taking a look at Columbus, Ohio. I moved here from Portland in 2020 to start investing and now own 10+ rentals, and it’s been amazing for both cash flow and appreciation. The macroeconomics are really strong with tons of job and population growth, plus huge developments from Intel, Amazon, Google, Honda, and more. You can still find solid single-family rentals in the $120–180K range that hit the 1% rule and cash flow from day one, which is rare in most major metros. It’s also super landlord-friendly, which helps if you’re just starting out. Happy to connect and answer any questions you have!

Jeff Roth · Answer

Hi Matheus-

Congratulations! You recently discovered Debt Service Coverage Ratio or DSCR loans.

You are self-employed and have about 30K to put down and wonder what markets would be good to invest.

There are several markets in Michigan that provide good cashflow and appreciation and would allow you to purchase with what you have to put down or less. One of those markets is Lansing, MI. We have the full team to recommend, including property managers, for these markets.

Make sure you plan to have some reserves as well.

To Your Success!

Min Zhang · Answer

That’s a solid question, Matheus! DSCR and bank statement loans can both work well for newer self employed investors. DSCR is great since it’s based on the property’s income instead of yours, but expect a higher rate and larger down payment (usually 20–25%). Bank statement loans can be a middle ground if your business income is strong and consistent.

With $30K, you might look into more affordable Midwest markets where single family homes can still cash flow and meet the 1% rule. Starting with a simpler turnkey rental could help you build lending history and experience before moving into more complex deals.

Are you leaning toward a single family or small multifamily for your first one?

Elealeh Fulmaran · Answer

DSCR can work great for new self‑employed investors because it qualifies off rent covering the payment, not your taxes, but expect a higher rate and stricter DSCR/rent tests; bank‑statement loans use 12 months of deposits to show income and also price higher with larger reserves. With ~30K, keep your buy box tight: target stable, working‑class C to B neighborhoods with proven rents, minimal rehab, and PM in place; consider markets known for cash‑flowing singles and small multis where price‑to‑rent ratios are favorable rather than chasing your backyard. Quick next steps: get preapproved with a DSCR and a bank‑statement lender, define your rent, price, and condition ranges, and have a property manager sanity‑check rents before offering.

Caleb Brown · Answer

I would save up and focus on getting a larger next egg. DSCR are great loans but you will be looking at properties sub 120K. Yes you can find deals in those areas but you need reserves. Midwest is common to find 100-150K price points.

What are good marlets

Most Popular Reply