Looking to buy 5-10units in NC/SC or TN
Chi SastryPro Member
Member since 2021 · 63 posts · 17 votesLooking to buy 5-10units in NC/SC or TN
5 Replies
- 3yDevin PetersonBusiness MemberLender · Sarasota, FL · Member since 2022 · 2k+ posts · 667 votes
Quote from @Chi Sastry:
In 2023 - I’m looking to buy 5-10 units in NC, SC or TN (I know - everyone is also!).
I own 5 doors (1 STR and 4plex) in NC. How do I go about getting commercial financing? Any ideas for people that scaled from 2 to 10. How did you get financing in the last 1-2 years pls. I don't think something from last 10-15 will be as relevant. I should be able to get to 20% down if it's under 1M.Hi Chi,
You will be seeking traditional commercial DSCR financing. Depending on the lender guidelines and what they haven an appetite for, you should be able to get anywhere between 75 and 80 LTV. There are a lot of good DSCR lenders on BiggerPockets feel free to utilize the Build Your Team tab, or also navigate to the preferred lenders page fore more resources.
ProAlpha Capital56 Reviews - Member since 2021 · 63 posts · 17 votes3y
Quote from @Devin Peterson:
Quote from @Chi Sastry:
In 2023 - I’m looking to buy 5-10 units in NC, SC or TN (I know - everyone is also!).
I own 5 doors (1 STR and 4plex) in NC. How do I go about getting commercial financing? Any ideas for people that scaled from 2 to 10. How did you get financing in the last 1-2 years pls. I don't think something from last 10-15 will be as relevant. I should be able to get to 20% down if it's under 1M.Hi Chi,
You will be seeking traditional commercial DSCR financing. Depending on the lender guidelines and what they haven an appetite for, you should be able to get anywhere between 75 and 80 LTV. There are a lot of good DSCR lenders on BiggerPockets feel free to utilize the Build Your Team tab, or also navigate to the preferred lenders page fore more resources.
Hi Devin - my four-plex is DSCR. The lenders I spoke to say DSCR is for 1-4 units. One of them went to 9 but was not sure about it.
Thanks!
- 3yStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 508 votes
@Chi Sastry, there are DSCR programs that are grouped into 1-4 unit programs and another for 5-8 units. They have different guidelines and underwriting for each program.
More on DSCR loans:
DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders
2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit.
I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.
Bright Skyline518 Reviews - 3yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Chi Sastry:
Quote from @Devin Peterson:
Quote from @Chi Sastry:
In 2023 - I’m looking to buy 5-10 units in NC, SC or TN (I know - everyone is also!).
I own 5 doors (1 STR and 4plex) in NC. How do I go about getting commercial financing? Any ideas for people that scaled from 2 to 10. How did you get financing in the last 1-2 years pls. I don't think something from last 10-15 will be as relevant. I should be able to get to 20% down if it's under 1M.Hi Chi,
You will be seeking traditional commercial DSCR financing. Depending on the lender guidelines and what they haven an appetite for, you should be able to get anywhere between 75 and 80 LTV. There are a lot of good DSCR lenders on BiggerPockets feel free to utilize the Build Your Team tab, or also navigate to the preferred lenders page fore more resources.
Hi Devin - my four-plex is DSCR. The lenders I spoke to say DSCR is for 1-4 units. One of them went to 9 but was not sure about it.
Thanks!
Check out this article on DSCR Loans for Multifamily (5-10), hopefully this helps!
Harpoon Capital514 Reviews - Member since 2021 · 63 posts · 17 votes3y
Quote from @Robin Simon:
Quote from @Chi Sastry:
Quote from @Devin Peterson:
Quote from @Chi Sastry:
In 2023 - I’m looking to buy 5-10 units in NC, SC or TN (I know - everyone is also!).
I own 5 doors (1 STR and 4plex) in NC. How do I go about getting commercial financing? Any ideas for people that scaled from 2 to 10. How did you get financing in the last 1-2 years pls. I don't think something from last 10-15 will be as relevant. I should be able to get to 20% down if it's under 1M.Hi Chi,
You will be seeking traditional commercial DSCR financing. Depending on the lender guidelines and what they haven an appetite for, you should be able to get anywhere between 75 and 80 LTV. There are a lot of good DSCR lenders on BiggerPockets feel free to utilize the Build Your Team tab, or also navigate to the preferred lenders page fore more resources.
Hi Devin - my four-plex is DSCR. The lenders I spoke to say DSCR is for 1-4 units. One of them went to 9 but was not sure about it.
Thanks!
Check out this article on DSCR Loans for Multifamily (5-10), hopefully this helps!
https://www.biggerpockets.com/blog/multifamily-dscr-loans
very helpful thanks! Now I need to find a few lenders that do DSCR for 5-10 in this environment :)
Join the conversationCreate a free account to reply, vote on answers and follow this thread.