Guidance with DSCR Loan for new investors

Detroit, Michigan
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Guidance with DSCR Loan for new investors

Nicolas Cuesta
Medellin, Colombia · Member since 2026 · 12 posts · 12 votes

I am a new investor and I am trying to look for a DSCR loan to fund my first deals, but here's the problem: I found two great SFH around 55K each but most loans require at least 75k-100k. Should I opt out of these deals and look for a 100k property or should I look for hard money instead?

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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
5mo
Quote from @Nicolas Cuesta:

I am a new investor and I am trying to look for a DSCR loan to fund my first deals, but here's the problem: I found two great SFH around 55K each but most loans require at least 75k-100k. Should I opt out of these deals and look for a 100k property or should I look for hard money instead?


 It will be very difficult to find a lender that can lend on such a low price point. I would suggest purchasing cash or looking for bigger deals that can be financed. 

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  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    5mo

    Do they need work? Hard money can work if you are able to bump the ARV. My other question would be on the area, is it rough? Is it worth the headache? You want to make sure you understand what you are buying and what to expect

    0Reply
  • Nicolas Cuesta
    OP
    Medellin, Colombia · Member since 2026 · 12 posts · 12 votes
    5mo

    Rent-ready properties, class C neighborhood.I am working with the property manager to avoid buying a headache.

    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    5mo
    Quote from @Nicolas Cuesta:

    I am a new investor and I am trying to look for a DSCR loan to fund my first deals, but here's the problem: I found two great SFH around 55K each but most loans require at least 75k-100k. Should I opt out of these deals and look for a 100k property or should I look for hard money instead?


     It will be very difficult to find a lender that can lend on such a low price point. I would suggest purchasing cash or looking for bigger deals that can be financed. 

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  • Austin ClarenceBusiness Member
    Lender · Phoenix, AZ · Member since 2023 · 136 posts · 32 votes
    5mo

    It's even harder to do hard money loans at that price point, DSCR is a little easier. DSCR is possible with $55K loan but once you go south of that it gets even harder. Happy to chat through your options.

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  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 508 votes
    5mo

    There are DSCR loans for ready to rent (so not fix and flip) investment properties that go down to a $75K appraised value and a $50K loan amount (depending on the LTV and borrower credit score). Loan options depend on the state and property location (for example rural properties are usually harder to get funded). You will have more DSCR loan options if you are above a $75K appraised value and even more DSCR loan options if the loan amount is above $100K. Happy to connect to discuss further.

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    5mo

    @Nicolas Cuesta

    nothing is rent ready at that price point as @Caleb Brown noted

    proceed with caution

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    5mo
    Quote from @Nicolas Cuesta:

    I am a new investor and I am trying to look for a DSCR loan to fund my first deals, but here's the problem: I found two great SFH around 55K each but most loans require at least 75k-100k. Should I opt out of these deals and look for a 100k property or should I look for hard money instead?


     i would avoid $55k properties as well as typically they are a lot more headache for the little cash flow and zero appreciation

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  • Nick DiSanza
    Investor · Orlando, FL · Member since 2025 · 30 posts · 8 votes
    5mo

    At that price point I would be surprised if the appraisals come back clean. Seems more like a hard money play 

    0Reply
  • Mike Klarman
    Specialist · NJ · Member since 2022 · 1k+ posts · 653 votes
    5mo

    I would not buy anything less than 100k with hard money and the value add has to be there.  Especially not in Detroit.  That's one of those areas you see on the do not lend list.  Just know that they cash you put in there may be trapped in there for a while.

    0Reply
  • Jake YuskaitisBusiness Member
    Lender · New Jersey, USA · Member since 2022 · 254 posts · 67 votes
    5mo

    most lenders will not do this. we can do down to $75k maybe $50k but a $55k property value is very low and we have run into that exact issue in Detroit.

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    5mo
    Quote from @Nicolas Cuesta:

    I am a new investor and I am trying to look for a DSCR loan to fund my first deals, but here's the problem: I found two great SFH around 55K each but most loans require at least 75k-100k. Should I opt out of these deals and look for a 100k property or should I look for hard money instead?


    Why you buying Class D in Detroit from OOS?

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  • Nicolas Cuesta
    OP
    Medellin, Colombia · Member since 2026 · 12 posts · 12 votes
    5mo

    That’s a fair question. I’m targeting Detroit because, from a fundamentals standpoint, it offers some of the most attractive price-to-rent ratios in the U.S., which fits my buy-and-hold strategy.

    On the Class C/D side, I’m fully aware these assets are management-intensive and come with higher operational risk. I’m underwriting very conservatively, assuming higher vacancy, capex, and turnover to make sure deals still make sense under stress.

    0Reply
  • Matthew Bernal
    Investor · Austin, TX · Member since 2021 · 497 posts · 127 votes
    5mo

    You're running into a pretty common issue most DSCR lenders have minimum loan amounts, so deals in that ~$50K range can be tough to place that way.

    That doesn’t necessarily mean you should pass on the deals. A lot of investors handle this by using short-term financing (or smaller-balance lenders) to acquire and stabilize, then either refinancing later or scaling into larger deals.

    I work with investors in this exact situation and help structure funding around smaller deals so they can still move forward without getting stuck on minimums.

    If the numbers are solid, there are definitely ways to make it work.

    Are these intended as rentals or flips once you get them stabilized?

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  • J CastroBusiness Member
    Lender · Florida · Member since 2025 · 698 posts · 253 votes
    5mo

    Hi @Nicolas Cuesta, welcome to BP!
    You don’t necessarily need to walk away from those deals—but you do need to match the financing strategy to the asset size.

    With DSCR, the challenge you're running into is real: many lenders have minimum loan sizes ($75K–$100K+), and sub-$60K properties often fall below their operational threshold or don’t justify underwriting costs.

    So the decision isn't really "DSCR vs hard money" as much as it is what stage the deal is in and how you plan to exit.

    Here’s how I’d think about it:

    1. DSCR isn’t the right fit (yet) for those assets
    Even if the property cash flows well, many DSCR lenders won't touch it because:

    • Loan amounts are too small
    • Appraisal costs don’t make sense relative to loan size
    • Some institutional lenders have minimum property value requirements

    2. Hard money (or private money) can absolutely work here
    For acquisitions like $55K SFHs:

    • Hard money can get you in quickly (purchase + rehab if needed)
    • You can stabilize the property
    • Then refinance into DSCR after seasoning or value increase

    This is actually a very common "bridge → DSCR" path for smaller assets.

    3. The third option investors overlook: portfolio/local lenders
    Some local banks and credit unions will:

    • Finance smaller deals ($40K–$100K range)
    • Hold loans in-house (more flexible underwriting)
    • Allow quicker repeat financing once you establish a track record

    I wouldn't skip good deals just because DSCR doesn't fit them today.
    Instead, structure the financing around:

    • Hard money / private capital to acquire
    • Refi into DSCR once stabilized or scaled

    Once you get a few deals under your belt and start bundling properties, DSCR becomes much easier to use efficiently.

    If you want, I can break down what a typical "hard money → DSCR refinance" timeline would look like for deals in that price range. Best of luck!

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  • Amit PatelBusiness Member
    Property Manager · Bartlett, IL · Member since 2025 · 156 posts · 64 votes
    5mo

    Those $55k SFH deals sound like they could cash flow nicely, but you're running into a very common issue right now.

    Most DSCR lenders do have minimum loan amounts between $75k–$100k (some go as low as $55k–$75k with a few niche programs, but they’re harder to find and often come with higher rates or fees). So yes — these smaller properties often don’t qualify.

    Here’s my straight 

    I’d lean toward passing on these two unless they’re absolute home runs (newer roof, mechanicals, clean inspection, strong rents). Cheap houses in that price range frequently hide big surprises (plumbing, sewer, foundation, etc.) that eat up your cash flow fast — especially as a new investor.

    Hard money is an option if you want to move fast, but it's expensive (higher interest, points, short-term) and you'll need a clear exit plan (refinance into DSCR later or sell). Not my favorite first move for someone just starting out.

    Better play for most beginners: Keep looking for properties that hit the $100k+ sweet spot so you can use standard DSCR financing right away. Cleaner, simpler, and less stress long-term.

    What market are these $55k houses in? Feel free to share a few more details (or even the listing links) and I’ll give you my honest take on whether they’re worth chasing.

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  • Vijay FriedmanBusiness Member
    Miami, FL · Member since 2026 · 766 posts · 122 votes
    5mo
    Quote from @Nicolas Cuesta:

    I am a new investor and I am trying to look for a DSCR loan to fund my first deals, but here's the problem: I found two great SFH around 55K each but most loans require at least 75k-100k. Should I opt out of these deals and look for a 100k property or should I look for hard money instead?

    @Nicolas Cuesta

    For $55k SFRs, the issue is usually lender minimums more than the property type itself.

    Most DSCR lenders have minimum loan amount or property value requirements, so a single $55k rental can be hard to place. I would not automatically skip the deals if the rent numbers are strong, but I'd think about structure first.

    Options to consider:

    • buy with cash/private money then refinance later
    • seller financing
    • local community bank or credit union
    • small-balance portfolio lender
    • bundle multiple properties into one DSCR/portfolio loan
    • look for a higher-value property if you want cleaner DSCR execution

    Hard money may work, but it can be expensive if your plan is long-term rental hold. If you’re buying several $55k rentals, bundling may be the better path. 

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  • James Driscoll
    Banker · MA · Member since 2026 · 120 posts · 33 votes
    4mo

    The $55K price point is genuinely the core challenge here — and it's worth understanding *why* before deciding on a path forward.

    Most DSCR lenders set a minimum loan amount (commonly $75K–$100K), not a minimum property value — but at a $55K purchase price with a 20–25% down payment, you're looking at a loan in the $41K–$44K range, which falls well below most DSCR floors. That's the mechanical problem. A few lenders will go down to $50K–$75K loan amounts, but the pool shrinks significantly and pricing tends to be less competitive at those levels.

    Here's how I'd think through the decision:

    - **Cash purchase**: If you have the capital, buying cash and refinancing later (a DSCR cash-out refi once the property is stabilized and seasoned) is a clean path. You capture the deal now and access equity down the road.

    - **Hard money / private lending**: Works, but factor the cost into your returns — points, higher rates, and short terms can erode cash flow on a $55K asset quickly.

    - **Portfolio lenders**: Some community banks and credit unions will lend on lower-balance investment properties using traditional underwriting rather than DSCR. Less scalable, but worth exploring.

    - **Reassess the deal**: If the DSCR math only works at a $55K price point and not at $75K+, ask yourself whether the deal is as strong as it looks or whether the numbers are too thin.

    With 31 years in the mortgage business, I've seen investors pass on deals because of financing friction only to watch those properties appreciate — and I've seen others force financing on thin deals that didn't cash flow. The asset quality and your exit flexibility matter as much as the loan structure.

    Happy to dig into the specifics if you want to walk through the numbers on either property — feel free to DM me.

    Jim Driscoll

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  • Cole Farrell
    Lender · Easton, PA · Member since 2019 · 90 posts · 32 votes
    4mo

    Definitely a tough price point. An idea is buy several using hard money under the same LLC, then get a blanket DSCR refinance.

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  • Nyron Isaac
    Member since 2024 · 144 posts · 28 votes
    3mo

    Don't walk away from good deals just because of loan minimums! Instead of a hard money loan—which can heavily eat into your cash flow on lower-priced assets—look into a Portfolio or Blanket DSCR loan. By bundling both $55k properties into one transaction, your total loan size jumps to $110k, easily clearing the standard $75k–$100k lender thresholds. 

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  • Guy Gottier
    Member since 2026 · 9 posts · 0 votes
    3mo

    Loan minimums can definitely be a challenge on lower-priced properties, especially for newer investors. I wouldn't rule out the deals solely because of the financing hurdle.

    We've seen investors use a variety of strategies for properties in that price range depending on the market, condition, and investment plan. Are the homes already producing income, or will they need renovation before they're rentable?


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  • Jordan RayBusiness Member
    Real Estate Agent · Memphis, TN · Member since 2023 · 642 posts · 333 votes
    3mo
    Quote from @Nicolas Cuesta:

    I am a new investor and I am trying to look for a DSCR loan to fund my first deals, but here's the problem: I found two great SFH around 55K each but most loans require at least 75k-100k. Should I opt out of these deals and look for a 100k property or should I look for hard money instead?


    Welcome to BiggerPockets! I wouldn't automatically pass on a good deal just because it doesn't fit a lender's minimum loan amount. In fact, this is one of the reasons many investors in Memphis use different financing tools depending on the stage of their investing journey. If the properties truly cash flow and the numbers work, I'd spend some time calling local and investor-focused lenders because minimum loan amounts vary quite a bit from lender to lender. You may also find portfolio lenders that are more flexible than national DSCR lenders. Another option is to buy one property with cash or conventional financing and save the DSCR loan for a larger acquisition later. Hard money can be a useful tool, especially if the property needs work and you're planning a BRRRR strategy, but I wouldn't use hard money simply because it's available—you still want a clear exit strategy and strong margins. The bigger question is whether these are actually great deals after you account for repairs, rent potential, insurance, taxes, and reserves. Start practicing by analyzing ARVs, rents, and market trends so you know exactly why the deal works and not just that the purchase price is low. Also, begin building your boots-on-the-ground team early—an investor-friendly agent who also owns rentals, a solid property manager, a reliable general contractor, and the right lending contacts—so you have multiple financing and acquisition options available when opportunities come up. Feel free to reach out, talk soon!

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  • Jordan RayBusiness Member
    Real Estate Agent · Memphis, TN · Member since 2023 · 642 posts · 333 votes
    3mo
    Quote from @Nicolas Cuesta:

    I am a new investor and I am trying to look for a DSCR loan to fund my first deals, but here's the problem: I found two great SFH around 55K each but most loans require at least 75k-100k. Should I opt out of these deals and look for a 100k property or should I look for hard money instead?

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  • Robert EllisBusiness Member
    Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
    3mo
    Quote from @Nicolas Cuesta:

    I am a new investor and I am trying to look for a DSCR loan to fund my first deals, but here's the problem: I found two great SFH around 55K each but most loans require at least 75k-100k. Should I opt out of these deals and look for a 100k property or should I look for hard money instead?


    The phrase that stood out to me was "opt out of these deals."

    Early on I almost talked myself into buying a property simply because I found a way to finance it. Looking back, I had it backwards. The financing should fit the property, not the other way around.

    I've also passed on deals that looked frustrating to finance, only to realize later I wasn't really walking away because of the lender. I was walking away because I wasn't completely comfortable with the asset.

    If these two houses are still the best deals after you account for turnover, maintenance, insurance, and management in that neighborhood, I'd keep looking for a financing solution. If the only thing making them attractive is the $55k price tag, I'd keep looking.

    What's the one thing that makes you believe these are "great" deals beyond the purchase price?

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