DSCR funding -- Purchase price between 150k-350k -- 5+ units?

[Ian Woods]

Hey Everyone,

I'm trying to find a DSCR lender that will work with low purchase prices. I'm purchasing in the tri-state area (WV/OH/KY), and I am able to find some great potential deals but many are too low in the loan amount. Some current examples are 10-unit property for 270k and a 5-unit prop for 210k.

And I'm seeing that some lenders offer DSCR loans up to 8 or 10 units... Has anyone worked with a lender that will go even higher?

Thanks for the assistance in advance! 

[Robin Simon]

Quote from @Ian Woods:

Hey Everyone,

I'm trying to find a DSCR lender that will work with low purchase prices. I'm purchasing in the tri-state area (WV/OH/KY), and I am able to find some great potential deals but many are too low in the loan amount. Some current examples are 10-unit property for 270k and a 5-unit prop for 210k.

And I'm seeing that some lenders offer DSCR loans up to 8 or 10 units... Has anyone worked with a lender that will go even higher?

Thanks for the assistance in advance! 

For properties that are over 10 units, you probably are looking at small balance commercial real estate loans rather than true "DSCR" Loans. DSCR Loans vs. SBCRE loans are generally differentiated by structure, whereas the advantage of a DSCR Loan is that its likely going to have a 30-year fixed rate term and the DSCR calculation will only take into account property taxes and insurance as expenses (calculated as Rent / PITI (principal + interest + taxes + insurance). For the small balance commercial loans the terms will likely be shorter and include a balloon payment and have a much more stringent underwriting qualification and the DSCR calc will be NOI/Debt Service, with NOI including a bunch more expenses such as utilities, repairs and maintenance, credit and vacancy loss, replacement reserves, management fee, etc. Not only that but will have a higher DSCR hurdle such as 1.20x or 1.25x.

The 5-10 unit niche for true DSCR loans is a pretty great product in my opinion since it combines the loose underwriting typically associated with SFRs with great cash flow from the extra units