Looking for DSCR vs Cash Out ReFi advice/referrals on New Construction Rental

Charlotte, North Carolina
Private Lending & Conventional Mortgage Advice
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Looking for DSCR vs Cash Out ReFi advice/referrals on New Construction Rental

Michael Harrill
Real Estate Broker · Salisbury, NC · Member since 2017 · 6 posts · 1 vote

Hi All, I'm currently building new SFR's using a HELOC on primary with the intent of either obtaining a DSCR or traditional mortgage cash out re-fi to repeat the process (build, rent, cash out, pay off HELOC, repeat). W-2 income and credit is strong, but would like to keep the rentals in an LLC. It is a headache to go the traditional route and having to quitclaim the deed, not to mention the time and hoops one must jump through these days. I am a GC and can build cheap enough to cash flow on a new property, so does it make more sense to go the DSCR route? Thanks in advance!

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

Hi All, I'm currently building new SFR's using a HELOC on primary with the intent of either obtaining a DSCR or traditional mortgage cash out re-fi to repeat the process (build, rent, cash out, pay off HELOC, repeat). W-2 income and credit is strong, but would like to keep the rentals in an LLC. It is a headache to go the traditional route and having to quitclaim the deed, not to mention the time and hoops one must jump through these days. I am a GC and can build cheap enough to cash flow on a new property, so does it make more sense to go the DSCR route? Thanks in advance!


 Hi - I wrote an article published right here on BiggerPockets on this exact topic, check out link below, hope this helps!  Would be glad to discuss personalized advice as well!

BRRRR Loans: What Are the Options, and How Do DSCR Loans Stack Up?

https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...

[email protected]
Harpoon Capital514 Reviews
WebsiteView Page
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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 667 votes
    2y

    You can do a DSCR cash-out refi on the new builds as long as they meet the lender's specific seasoning requirements for new builds. Just like any other rental property, you would need a tenant in place to cover the debt service. You can of course keep these properties in the LLC as well.

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    4Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y
    Quote from @Michael Harrill:

    Hi All, I'm currently building new SFR's using a HELOC on primary with the intent of either obtaining a DSCR or traditional mortgage cash out re-fi to repeat the process (build, rent, cash out, pay off HELOC, repeat). W-2 income and credit is strong, but would like to keep the rentals in an LLC. It is a headache to go the traditional route and having to quitclaim the deed, not to mention the time and hoops one must jump through these days. I am a GC and can build cheap enough to cash flow on a new property, so does it make more sense to go the DSCR route? Thanks in advance!


     Hi - I wrote an article published right here on BiggerPockets on this exact topic, check out link below, hope this helps!  Would be glad to discuss personalized advice as well!

    BRRRR Loans: What Are the Options, and How Do DSCR Loans Stack Up?

    https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    14Reply
  • Brian Cauldwell
    Lender · Springfield, MO · Member since 2023 · 104 posts · 78 votes
    2y

    Hi @Michael Harrill! Devin is correct, seasoning is going to be the biggest thing to solve for in how quickly you are looking to pull out money. A lot of my clients like a program that has 3 months of seasoning so they can refinance as quickly as possible. However, each lender will have a different seasoning period. 3 months, 6 months, and 12 months is the typical points when a lender is comfortable with using the new value of the property instead of how much you have spent on the property. 

    Another important thing with a DSCR loan is the property being rented. If the property is not rented that will limit your options greatly. Few lenders will do a vacant refinance, and even less will do that at max LTV.

    3Reply
  • Joe Dillamore
    Lender · Greenville, SC · Member since 2023 · 39 posts · 6 votes
    2y

    @Michael Harrill DSCR seems the most sensible way to cash-out. There are lenders that don't have heavy seasoning requirements, but they may just lower the cash-out LTV. I own a platform that matches investors to their best funding options on projects just like yours. I would love to help out, so please don't hesitate to contact me - my info is below

    1Reply
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