DSCR loans for $50-$80k purchase price

Detroit, Michigan
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DSCR loans for $50-$80k purchase price

Darnell Robinson
Real Estate Agent · Oakland, CA · Member since 2015 · 33 posts · 11 votes

Greetings! 

My partner and I visited Detroit MI this past weekend and found 2 deals:

TRIPLEX for $50k with ARV of $130k with one unit already rented at $1000 & the other two needing about $30k to rehab. Address is 13000 Plymouth Rd Detroit, MI 48227.

DUPLEX at $75k. Duplex, ARV $100-$127k both units empty, one is ready to rent and the other needs about $15k rehabs rents at $1200 per unit, per our agents MLS info. 12190 Santa Rosa Drive, Detroit MI 48204.


We've been trying to get a DSCR Loan but keep hearing the purchase amount is too low. Any suggestions?

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Ryan Stuckey
Lender · Member since 2022 · 217 posts · 149 votes
3y

Hi Darnell,

With rehab required, you don't need a DSCR loan yet. You need to find short-term purchase and rehab financing (i.e. hard money or private lender) to acquire and improve the property. When rehab is done and the project is market-ready, you can either sell it or hold/refinance with long-term DSCR financing based on the market rental income on the post-rehab condition. The good news is that purchase and rehab loan size minimums are lower than DSCR minimums.

DSCR is about long-term financing, not short-term purchase and rehab financing. There is no debt service coverage when a property is vacant/distressed and in need of rehab to produce a rental income situation.

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  • Celia Lumbroso
    Lender · Santa Monica, CA · Member since 2023 · 63 posts · 26 votes
    3y

    Hi @Darnell Robinson I think a critical issue is your target market. Detroit would be a difficult market to utilize a DSCR loan in due to the low amount of monthly rental income coming in. You will likely encounter this issue with multiple lenders in the area. Alternatively, you could pursue a hard money loan for rental financing which wouldn't require certain rental income to qualify.

    0Reply
  • Darnell Robinson
    OP
    Real Estate Agent · Oakland, CA · Member since 2015 · 33 posts · 11 votes
    3y

    Can you recommend a hard money lender in mind?

    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    3y
    Quote from @Darnell Robinson:

    Greetings! 

    My partner and I visited Detroit MI this past weekend and found 2 deals:

    TRIPLEX for $50k with ARV of $130k with one unit already rented at $1000 & the other two needing about $30k to rehab. Address is 13000 Plymouth Rd Detroit, MI 48227.

    DUPLEX at $75k. Duplex, ARV $100-$127k both units empty, one is ready to rent and the other needs about $15k rehabs rents at $1200 per unit, per our agents MLS info. 12190 Santa Rosa Drive, Detroit MI 48204.


    We've been trying to get a DSCR Loan but keep hearing the purchase amount is too low. Any suggestions?


     Hey Darnell, 

    They exist but the points and rate will be high. The minimum loan amount is $50k, but it must be under a blanket mortgage. On a blanket mortgage the property must be the same type and in the same state. 

    [email protected]818-269-7983
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  • Darnell Robinson
    OP
    Real Estate Agent · Oakland, CA · Member since 2015 · 33 posts · 11 votes
    3y

    Thanks Erik. I’ll keep grinding it out 

    0Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    3y

    @Darnell Robinson one on Plymouth is Class C-minus at best. Highly unlikely the rent is $1k.

    Santa Rosa is a better Class C location.

    Logical Property Management4.9460 Reviews
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    0Reply
  • Darnell Robinson
    OP
    Real Estate Agent · Oakland, CA · Member since 2015 · 33 posts · 11 votes
    3y

    Plymouth is what it is. Rent is $1000 in one unit. Not about whether it’s likely, that’s what it is. Not my speculation 

    3Reply
  • Dennis Muno
    Lender · Denton, TX · Member since 2023 · 349 posts · 80 votes
    3y
    Quote from @Darnell Robinson:

    Greetings! 

    My partner and I visited Detroit MI this past weekend and found 2 deals:

    TRIPLEX for $50k with ARV of $130k with one unit already rented at $1000 & the other two needing about $30k to rehab. Address is 13000 Plymouth Rd Detroit, MI 48227.

    DUPLEX at $75k. Duplex, ARV $100-$127k both units empty, one is ready to rent and the other needs about $15k rehabs rents at $1200 per unit, per our agents MLS info. 12190 Santa Rosa Drive, Detroit MI 48204.


    We've been trying to get a DSCR Loan but keep hearing the purchase amount is too low. Any suggestions?

     Hello Darnell,

    SO most DSCR loans look for a minimum loan amount for $100K-$150K. There are very few lenders who do DSCR loans with a purchase of such low amounts. I've seen only one lender who does that but you can't do it under LLC but in your personal name. Also, your interest will be crazy because for such the loan amount lenders consider it risky.

    Perhaps private money for purchase then refinance when you can? I think that's a way to proceed. The low loan amounts may not help per each property but if someone will give you money to purchase all three and you'll have money for closing costs this could be a way to proceed

    2Reply
  • Account Closed
    Lender · Columbus, OH · Member since 2023 · 56 posts · 25 votes
    3y

    Hi Darnell:

    I can help you with loan amounts down to $55,000 on DSCR loans. We require 20% down, so that would make or minimum purchase price $68,750

    1Reply
  • Dennis Muno
    Lender · Denton, TX · Member since 2023 · 349 posts · 80 votes
    3y
    Quote from @Darnell Robinson:

    Greetings! 

    My partner and I visited Detroit MI this past weekend and found 2 deals:

    TRIPLEX for $50k with ARV of $130k with one unit already rented at $1000 & the other two needing about $30k to rehab. Address is 13000 Plymouth Rd Detroit, MI 48227.

    DUPLEX at $75k. Duplex, ARV $100-$127k both units empty, one is ready to rent and the other needs about $15k rehabs rents at $1200 per unit, per our agents MLS info. 12190 Santa Rosa Drive, Detroit MI 48204.


    We've been trying to get a DSCR Loan but keep hearing the purchase amount is too low. Any suggestions?


     Also, what part of Detroit? Some lenders(private money) may not want to lend in all of Detroit. Just saying

    0Reply
  • Ryan Stuckey
    Lender · Member since 2022 · 217 posts · 149 votes
    3y

    Hi Darnell,

    With rehab required, you don't need a DSCR loan yet. You need to find short-term purchase and rehab financing (i.e. hard money or private lender) to acquire and improve the property. When rehab is done and the project is market-ready, you can either sell it or hold/refinance with long-term DSCR financing based on the market rental income on the post-rehab condition. The good news is that purchase and rehab loan size minimums are lower than DSCR minimums.

    DSCR is about long-term financing, not short-term purchase and rehab financing. There is no debt service coverage when a property is vacant/distressed and in need of rehab to produce a rental income situation.

    3Reply
  • Brandon BeardtPro Member
    Lender · La Crescenta, CA · Member since 2021 · 261 posts · 157 votes
    3y
    Quote from @Darnell Robinson:

    Greetings! 

    My partner and I visited Detroit MI this past weekend and found 2 deals:

    TRIPLEX for $50k with ARV of $130k with one unit already rented at $1000 & the other two needing about $30k to rehab. Address is 13000 Plymouth Rd Detroit, MI 48227.

    DUPLEX at $75k. Duplex, ARV $100-$127k both units empty, one is ready to rent and the other needs about $15k rehabs rents at $1200 per unit, per our agents MLS info. 12190 Santa Rosa Drive, Detroit MI 48204.


    We've been trying to get a DSCR Loan but keep hearing the purchase amount is too low. Any suggestions?


     Hi Darnell,

    I don't believe you'll be able to find a DSCR loan for Plymouth Rd. The value and loan amount is too low for institutional lenders. The lowest loan amount I've seen allowed is around $55K with minimum property value/purchase price at $75K, just for the subject property. For Santa Roa Dr, you may have an option there if it can meet those minimums. Considering you're planning on putting $15K into the rehab, you could benefit by looking into short-term FNF/FNH financing options as well, if you don't have the rehab funds available. That way you can refinance once the rehab is complete and get a loan based on the new appraised value of the property. Just a few options to consider. If those numbers are accurate, it seems you have DSCR and FNF/FNH options at your disposal. Best of luck!

    [email protected]818-726-2418
    0Reply
  • Darnell Robinson
    OP
    Real Estate Agent · Oakland, CA · Member since 2015 · 33 posts · 11 votes
    3y

    I’m not familiar with FNF/FNH financing. 

    0Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    3y
    Quote from @Darnell Robinson:

    Plymouth is what it is. Rent is $1000 in one unit. Not about whether it’s likely, that’s what it is. Not my speculation 


    Following your logic, it actually doesn't matter what the rent amount is, all that matters is what the tenant pays and for how long.

    Class C properties do NOT perform like Class A or even Class B properties. Tenant performance decreases as the property Class decreases.

    Have seen too many out-of-state investors misread the City of Detroit neighborhood markets and liquidate their holdings when their expectations weren't met. 

    We WANT YOU TO SUCCEED and bring more money to Detroit and keep the city's revival going.

    To that end, we ranked all Metro Detroit cities and City of Detroit Neighborhoods on our website.

    Let us know how else we can help you better understand the City of Detroit markets:)

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    2Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Darnell Robinson:

    Greetings! 

    My partner and I visited Detroit MI this past weekend and found 2 deals:

    TRIPLEX for $50k with ARV of $130k with one unit already rented at $1000 & the other two needing about $30k to rehab. Address is 13000 Plymouth Rd Detroit, MI 48227.

    DUPLEX at $75k. Duplex, ARV $100-$127k both units empty, one is ready to rent and the other needs about $15k rehabs rents at $1200 per unit, per our agents MLS info. 12190 Santa Rosa Drive, Detroit MI 48204.


    We've been trying to get a DSCR Loan but keep hearing the purchase amount is too low. Any suggestions?


    Ok here is the thing Darnell, for private lending we weight ~40% on the property "deal" itself, and 60% on the Operator themself; if they know what there doing, can they pull it off, do they have the "chops" for it, are they contingency ready, etc etc.. 

    By my review of Plymouth Rd, I have a strong sense your out of your depth. 

    This thing has major reno needed including fire damage mitigation. Old electric, just all the issues. I think your off-base on your reno budget working with best case scenario and/or limited knowledge. With everything exposed, were talking code requirements on everything. It could very possibly cost more to make reno than to just knock-down and build new. 

    When someone presents to "tap" Private-$ we want to do as little thinking as humanly possible, that's to say the burden is on you the proposed borrower to present a complete, detailed "pitch" outlining the allocation of every cent, contingencies, time-lines, data supporting each action item. Literally covering everything so our entire mental process is just review and decision. I share this to say, are you ready for that? 

    The terms will be fair, but also terrifying for non-performance. Additional securitization is most likely required via additional assets. The penalty for failure will be significant, to put it politely. Again, are you ready for that? 

    0Reply
  • Aarielle Pannesi
    Member since 2020 · 13 posts · 4 votes
    3y
    Quote from @Account Closed:

    Hi Darnell:

    I can help you with loan amounts down to $55,000 on DSCR loans. We require 20% down, so that would make or minimum purchase price $68,750


     What states do you cover?

    0Reply
  • Darnell Robinson
    OP
    Real Estate Agent · Oakland, CA · Member since 2015 · 33 posts · 11 votes
    3y

    REI REALTOR,

    I appreciate the feedback. My partner has done countless rehabs and is currently doing one with fire damage right now in KC. We're aware of what Plymouth looks like on the construction costs. There seems to be a misperception about my post, I only posted those two deals to show what we've been seeing (low purchase prices that we KNOW we can fix as WE are doing the work). I didn't post it to get financing just for Plymouth or the duplex. I posted because this would be my first time asking for DSCR, Fix/flip, long term/short term financing & I'm curious how that plays around what we've been encountering in Detroit. I live in Oakland and am now searching the Bay Area for similar financing out here. Detroit was just a very different market. So yes, to answer your question, I'm well prepared for whatever I get myself involved in. And as you seem to have done your diligence on that one property, so have we. I understand your position as a possible lender and what you've stated also. Again,Thanks for the feedback!


    0Reply
  • Account Closed
    Lender · Columbus, OH · Member since 2023 · 56 posts · 25 votes
    3y
    Quote from @Aarielle Pannesi:
    Quote from @Account Closed:

    Hi Darnell:

    I can help you with loan amounts down to $55,000 on DSCR loans. We require 20% down, so that would make or minimum purchase price $68,750


     What states do you cover?

    For the $55,000 loan we lend in about 40 states, what state are you in?  With a minimum loan amount of $75,000 I can help everywhere but ND,SD, and NV.
    0Reply
  • Richard Rubin
    Tampa, FL · Member since 2015 · 1 post · 0 votes
    2y
    Quote from @Account Closed:

    Hi Darnell:

    I can help you with loan amounts down to $55,000 on DSCR loans. We require 20% down, so that would make or minimum purchase price $68,750

    Hi Mike:

    Could you go down to a $55,000 loan amount for a cash-out refi if I purchase the property with cash?  Also in Detroit.

    Thanks,

    Richard
     

    0Reply
  • Brannon Harnish
    Member since 2023 · 10 posts · 1 vote
    2y
    Quote from @Account Closed:
    Quote from @Aarielle Pannesi:
    Quote from @Account Closed:

    Hi Darnell:

    I can help you with loan amounts down to $55,000 on DSCR loans. We require 20% down, so that would make or minimum purchase price $68,750


     What states do you cover?

    For the $55,000 loan we lend in about 40 states, what state are you in?  With a minimum loan amount of $75,000 I can help everywhere but ND,SD, and NV.

    Mike - can you close in an LLC

    0Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    @Darnell Robinson for the low prices in Detroit, most investors either pay cash or have a private lender they use.

    You can also look into rehab lenders like CIVIC, LYNK, Lima One Capital, etc. They usually go off the ARV, but some still have minimum acquisition amounts.

    Logical Property Management4.9460 Reviews
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    0Reply
  • Ryan Woodham
    Lender · Greenville SC · Member since 2022 · 1 post · 0 votes
    2y

    Hey Darnell, I help folks finance deals in Detroit frequently and I'm actually from the Sterling Heights area myself. (Go Lions!) Would love to connect with you on a direct message!

    0Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    @Darnell Robinson just came across this BP post which may help you:

    100% Financing on Fix and Flips and Ground Up Nationwide (biggerpockets.com)

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  • Cameron Mehta
    Rental Property Investor · CA · Member since 2017 · 17 posts · 7 votes
    2y

    SO many people here with opinions that know nothing about Detroit. There are for sure DSCR lenders that lend down to 50k. And the person who said Detroit property rents are so low and won't work for DSCR debt is on crack.

    1Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y
    Quote from @Cameron Mehta:

    SO many people here with opinions that know nothing about Detroit. There are for sure DSCR lenders that lend down to 50k. And the person who said Detroit property rents are so low and won't work for DSCR debt is on crack.


    Agreed - the one thing that will probably be the least worrisome about the deals is cash flow (DSCR Ratio) should be fine. There are DSCR Lenders that will lend that low, but to be fair, its kind of rare right now on that point

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  • Ryan Brown
    Member since 2024 · 3 posts · 1 vote
    2y
    Quote from @Cameron Mehta:

    SO many people here with opinions that know nothing about Detroit. There are for sure DSCR lenders that lend down to 50k. And the person who said Detroit property rents are so low and won't work for DSCR debt is on crack.


    Cameron would you mind naming a few lenders that offer DSCR loans with 50K min? Specifically asking for Detroit area.

    1Reply
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