I am about to close on a my first rental property via a DSCR loan. All has been going well and I got the property at a great price. The appraisal just came back at 335k (not terrible, but I thought it would be closer to 350k) and my purchase price is 295k, so we are good there. However, the market rent came in at $1,900, and my mortgage payment with escrow is about $2,200. The previous tenant under the seller's ownership was paying $2,100 per month before a COMPLETE remodel, and I have a lease agreement signed and a deposit from new tenant's at $2,675 per month, well above their market rent estimate.
So how screwed am I? I am already putting 25% down, so I cannot afford to put more cash down. What would my options be here?
Hey — congrats on getting to the finish line with your first rental! It sounds like you got a solid deal on the purchase, even with the appraisal coming in a bit lower than expected.
I’ve actually had something really similar happen with a property I bought in Florida. The appraiser came back with a low market rent estimate that didn’t reflect current conditions — especially after renovations. What we did was challenge the rent analysis by submitting stronger rental comps, along with a copy of the executed lease and deposit we had in hand. That made a big difference.
In our case, it worked — the lender accepted the updated info, and we were able to move forward and close the deal without putting in more cash.
Since you've already got a signed lease at $2,675 (well above the market rent they cited), that's a strong piece of evidence. I'd recommend gathering a few comps showing similar properties renting at or near that rate and sending them to your lender ASAP. Some DSCR lenders are open to reconsidering if you can clearly support the income being generated.
You’re not screwed at all — just a little curveball. You’ve got a good deal on your hands and a lease that supports it. Just might take a bit of back and forth to get it across the finish line.
Wow, this is promising! That is exactly what I was thinking of doing. I am bound to make this deal work. From the sound of my lender, he is optimistic about it. Fingers crossed!
I am about to close on a my first rental property via a DSCR loan. All has been going well and I got the property at a great price. The appraisal just came back at 335k (not terrible, but I thought it would be closer to 350k) and my purchase price is 295k, so we are good there. However, the market rent came in at $1,900, and my mortgage payment with escrow is about $2,200. The previous tenant under the seller's ownership was paying $2,100 per month before a COMPLETE remodel, and I have a lease agreement signed and a deposit from new tenant's at $2,675 per month, well above their market rent estimate.
So how screwed am I? I am already putting 25% down, so I cannot afford to put more cash down. What would my options be here?
Thanks!
Update.
The underwriters approved this exception and we are clear to close!