Seeking DSCR loan for LLC under $100k in Philadelphia

Private Lending & Conventional Mortgage Advice
2yFollow

Seeking DSCR loan for LLC under $100k in Philadelphia

Andre Delacroix
Member since 2023 · 3 posts · 4 votes

Hello BP community!

Looking to purchase a $110K townhome with existing HCV/Section 8 tenants ($1350 rent, $1000 govt $350 tenant) with my LLC.

Loan amount would be under $100k assuming I would be putting 20% down, unless a better option exists.

Any well recommended lenders? Close date preference 11/10/23 or earlier.

All the best!

3Reply
37 views

Most Popular Reply

Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
2y
Quote from @Andre Delacroix:

Hello BP community!

Looking to purchase a $110K townhome with existing HCV/Section 8 tenants ($1350 rent, $1000 govt $350 tenant) with my LLC.

Loan amount would be under $100k assuming I would be putting 20% down, unless a better option exists.

Any well recommended lenders? Close date preference 11/10/23 or earlier.

All the best!


 One thing to watch out for here is prepayment penalty options - Pennsylvania is the state with the most vague/unclear rules on prepayment penalties that different lenders interpret differently, some may be able to offer standard prepayment penalties (i.e. 5/4/3/2/1) on a loan like this but some may not be able to charge a prepay, resulting in a much much higher rate.

[email protected]
Harpoon Capital514 Reviews
WebsiteView Page
1Reply
See this reply in the discussion

9 Replies

Jump to latestLatest
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Andre Delacroix:

    Hello BP community!

    Looking to purchase a $110K townhome with existing HCV/Section 8 tenants ($1350 rent, $1000 govt $350 tenant) with my LLC.

    Loan amount would be under $100k assuming I would be putting 20% down, unless a better option exists.

    Any well recommended lenders? Close date preference 11/10/23 or earlier.

    All the best!


     Hey Andre, 

    Some DSCR lenders have a minimum loan amount of $75,000. What are market rents?

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    0Reply
  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    2y

    Hey Andre -

    You'll find that most lenders have minimum loan amounts of $100k, but there are some that will go down to $75k. I even know of one that'll go down to $55k. You might want to plan for 25% down instead of 20%, especially if your potential lender pool is narrowed to those that'll go below $100k. FICO will also be a factor, and your close date shouldn't be an issue. Feel free to connect. 

    [email protected]330-354-6590
    Brittany Minocchi - Barrett Financial Group, LLC522 Reviews
    View Page
    0Reply
  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 503 votes
    2y

    There's lenders that go down to $55K loan amount and a $75K value. 

    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.

    [email protected]818-770-0340
    Bright Skyline518 Reviews
    WebsiteView Page
    0Reply
  • Rivers Fike
    Lender · Member since 2023 · 52 posts · 18 votes
    2y

    Is this your first deal or do you have an existing portfolio?  @Andre Delacroix

    I have done a few portfolio loans recently getting investors access to equity in a portfolio to purchase deals of similar price to this. Maybe a private lender could provide a creative option or have some flexibility depending on your situation  

    0Reply
  • Kristen L GarnerBusiness Member
    Lender · Phoenix, AZ · Member since 2021 · 451 posts · 287 votes
    2y

    Hi Andre! You are right that most DSCR products have a $100k minimum requirement. However there are products with a minimum as low as $50k so you shouldn't have an issue getting this deal done. Down payment should be 20% unless there are issues with the DSCR ratio or your credit falls in a lower tier - then you'd be looking at 25% down. Your closing date also shouldn't be an issue. Most DSCR loans can be closed in 30 days or less with the exception of rural or very unique properties which often take closer to 45 days to close.

    [email protected]213-880-0434
    0Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y
    Quote from @Andre Delacroix:

    Hello BP community!

    Looking to purchase a $110K townhome with existing HCV/Section 8 tenants ($1350 rent, $1000 govt $350 tenant) with my LLC.

    Loan amount would be under $100k assuming I would be putting 20% down, unless a better option exists.

    Any well recommended lenders? Close date preference 11/10/23 or earlier.

    All the best!


     One thing to watch out for here is prepayment penalty options - Pennsylvania is the state with the most vague/unclear rules on prepayment penalties that different lenders interpret differently, some may be able to offer standard prepayment penalties (i.e. 5/4/3/2/1) on a loan like this but some may not be able to charge a prepay, resulting in a much much higher rate.

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    1Reply
  • Andre Delacroix
    OP
    Member since 2023 · 3 posts · 4 votes
    2y
    Quote from @Robin Simon:
    Quote from @Andre Delacroix:

    Hello BP community!

    Looking to purchase a $110K townhome with existing HCV/Section 8 tenants ($1350 rent, $1000 govt $350 tenant) with my LLC.

    Loan amount would be under $100k assuming I would be putting 20% down, unless a better option exists.

    Any well recommended lenders? Close date preference 11/10/23 or earlier.

    All the best!


     One thing to watch out for here is prepayment penalty options - Pennsylvania is the state with the most vague/unclear rules on prepayment penalties that different lenders interpret differently, some may be able to offer standard prepayment penalties (i.e. 5/4/3/2/1) on a loan like this but some may not be able to charge a prepay, resulting in a much much higher rate.


     Thank you Robin, yes I have came across this experience, how does Easy Street interpret it?

    0Reply
  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    2y

    Say your HOA is $120 and HO6 insurance $100 plus PITI $975 = $1195 you make it with 20% down and $1200 rents

    You need 720 FICO, 6 months reserves (all bills times 6 in savings okay to use 60% of a 401k), personal guarantee and yes it shows on credit. 

    Is the Section 8 tenant in place? Ask for proof that seller the  deposited $350 past 12 months. You are going to be VERY tight and if they don't pay that portion and you have to repair something... you need cash. Insurance cost will rise in the future. 

    Not a great investment with tight margins.

    0Reply
  • Richard Angelo Bettencourt
    Realtor · Vero Beach, FL · Member since 2022 · 14 posts · 3 votes
    2y

    @Andre Delacroix I have a lender contact for you. I'm not sure that you'll be able to close in that unless you get it moving. 7725104845 Cardinal financial. Ask for jake and give my name

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free