DSCR for acquisition of existing PadSplit

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DSCR for acquisition of existing PadSplit

Bob Willis
Investor · Curtis, NE · Member since 2019 · 231 posts · 140 votes

I am interested in talking to someone about the process of funding via DSCR the acquisition of a property currently being run as a PadSplit. The plan is to keep operating the property as a PadSplit post-acquisition. What kind of seasoning is generally required as it relates to the rents/revenue as it relates to servicing the note, etc...

I currently own one PadSplit (acquired via Subject-to) that has been up just over a month. And the plan is to convert an existing Airbnb I own (and have run as an Airbnb since 2019) to PadSplit. This conversion will begin at the end of the month.

I am just sharing the above to give context to my level of experience with this type of investment.

I look forward to hearing from you all.

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Josh Bowser
Real Estate Agent · Atlanta, GA · Member since 2020 · 414 posts · 233 votes
2y

Bob - I have five occupied padsplits under contract right now with Fernando Corona and have closed several with him this year.

Normal DSCR brokers have issues getting this through underwriting - it's important to work with a broker / lender that fully understands how to get these to CTC.

I'll PM you

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y

    There are a very small pool of lenders okay with a PadSplit. They will base their DSCR calculation on the market rent 1007. If the market rents do not cover the mortgage, you may do a no ratio DSCR for a higher rate/reduced LTV

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  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    2y

    Bob,

    I join you in looking forward to an experienced Poster's answer since I'm getting more calls for DSCR loans. I just started researching when I saw you post. DSCR in not currently in our toolbox, but I'm recommending to my partners that we should embrace this product.
    Mike

    0Reply
  • Bob Willis
    OP
    Investor · Curtis, NE · Member since 2019 · 231 posts · 140 votes
    2y
    Quote from @Erik Estrada:

    There are a very small pool of lenders okay with a PadSplit. They will base their DSCR calculation on the market rent 1007. If the market rents do not cover the mortgage, you may do a no ratio DSCR for a higher rate/reduced LTV


     Which most likely the 1007 will be nowhere near the revenue generated by a PadSplit operation. The specific property I am looking at right now is netting from PadSplit to the current owner  between $5k-$6k per month. I am guessing the 1007 would be around $2k/month for the specific property. So it makes me think this may not be the way to go. I guess my question would be, if that small pool of lenders is okay with PadSplit, why would they use 1007? That's comparing apples to oranges. I imagine the argument would be, well if PadSplit disappears we need to base it off this less, more conservative number...

    0Reply
  • George DespotopoulosBusiness Member
    Lender · New York, NY · Member since 2016 · 936 posts · 287 votes
    2y

    @Bob Willis PadSplit is a little tricky. Unless I'm mistaken, the contract between owner/landlord and PadSplit doesn't have a defined monthly rent but a target/goal of monthly income (so it's hard to use that as lease). Also, many PadSplit properties have bedrooms that are created via flex walls that wouldn't meet the definition of a bedroom in an appraisal, so many PadSplit owners may think their property is worth a certain a mount based on a bed count that's not valid. 

    Nonetheless, you can base the DSCR calculation on PadSplit rent (if there's a history of PadSplit income being produced) or short-mid-term market rent (an analysis done at the same time of appraisal). Not a lot of our competitors offer this but it's something we can consider (but for us, it can't be in a rural area, the loan amount must exceed $150k, if we're using PadSplit income (or STR/MTR income) the max LTV is 75% and the down payment must come from your own funds).

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Bob Willis:
    Quote from @Erik Estrada:

    There are a very small pool of lenders okay with a PadSplit. They will base their DSCR calculation on the market rent 1007. If the market rents do not cover the mortgage, you may do a no ratio DSCR for a higher rate/reduced LTV


     Which most likely the 1007 will be nowhere near the revenue generated by a PadSplit operation. The specific property I am looking at right now is netting from PadSplit to the current owner  between $5k-$6k per month. I am guessing the 1007 would be around $2k/month for the specific property. So it makes me think this may not be the way to go. I guess my question would be, if that small pool of lenders is okay with PadSplit, why would they use 1007? That's comparing apples to oranges. I imagine the argument would be, well if PadSplit disappears we need to base it off this less, more conservative number...


     Maybe eventually they will allow the income just like short term rentals. You can also opt for a no ratio loan, however the rate will be much higher. 

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    0Reply
  • Alex Hunt
    Lender · Member since 2022 · 441 posts · 134 votes
    2y

    @Bob Willis Familiar with the underwriting for this & happy to help on this. Send a message.

    @Mike Grudzien Happy to help on an DSCR and we also help train brokers in this program so they can speak on & guide better on it, Great product to have.

    0Reply
  • Josh Bowser
    Real Estate Agent · Atlanta, GA · Member since 2020 · 414 posts · 233 votes
    2y

    Bob - I have five occupied padsplits under contract right now with Fernando Corona and have closed several with him this year.

    Normal DSCR brokers have issues getting this through underwriting - it's important to work with a broker / lender that fully understands how to get these to CTC.

    I'll PM you

    4Reply
  • Jarrod Ochsenbein
    Rental Property Investor · Oregon/Arizona · Member since 2023 · 124 posts · 79 votes
    2y
    Quote from @Josh Bowser:

    Bob - I have five occupied padsplits under contract right now with Fernando Corona and have closed several with him this year.

    Normal DSCR brokers have issues getting this through underwriting - it's important to work with a broker / lender that fully understands how to get these to CTC.

    I'll PM you


     I have spoken to Fernando a few times and he seems great although I haven't done a loan with him yet.  

    2Reply
  • Jarrod Ochsenbein
    Rental Property Investor · Oregon/Arizona · Member since 2023 · 124 posts · 79 votes
    2y

    I purchased an existing Padsplit with a DSCR loan. Since some of the rooms did not have closets technically they are not bedrooms. The appraisal stated one was an office, another was a den and the 3rd was I think called a daylight room. At any rate it is possible, but depending on your appraisal it could be a gamble. :)

    0Reply
  • Bob Willis
    OP
    Investor · Curtis, NE · Member since 2019 · 231 posts · 140 votes
    2y
    Quote from @Jarrod Ochsenbein:

    I purchased an existing Padsplit with a DSCR loan. Since some of the rooms did not have closets technically they are not bedrooms. The appraisal stated one was an office, another was a den and the 3rd was I think called a daylight room. At any rate it is possible, but depending on your appraisal it could be a gamble. :)


     Yeah - I have an appraisal in hand for the property, that was completed just a couple of weeks ago, that is substantially higher than the asking price.

    1Reply
  • Jean Brune
    New York, NY · Member since 2019 · 17 posts · 12 votes
    1y
    Based on the responses, it looks like you're in good hands Bob! I would highly recommend talking to Jeff Weller at Coast 2 Coast and Fernando Corona both are also PadSplit hosts but we're some of the first expert lenders . Here's a link to both of their PadSplit stories:
    Jeff: https://www.padsplit.com/host-resources/case-studies/jeff-we...
    Fernando: https://www.padsplit.com/stories/hosts/fernando-and-amaris-c...

    Quote from @Bob Willis:

    I am interested in talking to someone about the process of funding via DSCR the acquisition of a property currently being run as a PadSplit. The plan is to keep operating the property as a PadSplit post-acquisition. What kind of seasoning is generally required as it relates to the rents/revenue as it relates to servicing the note, etc...

    I currently own one PadSplit (acquired via Subject-to) that has been up just over a month. And the plan is to convert an existing Airbnb I own (and have run as an Airbnb since 2019) to PadSplit. This conversion will begin at the end of the month.

    I am just sharing the above to give context to my level of experience with this type of investment.

    I look forward to hearing from you all.


    0Reply
  • Josh Bowser
    Real Estate Agent · Atlanta, GA · Member since 2020 · 414 posts · 233 votes
    1y

    Gang - I love the back in forth on this thread and looks like this post keeps getting responses!

    If anyone has an end lender that has successfully closed a handful occupied padsplit loans and can underwrite based off actual padsplit rents I would really appreciate an intro. I'm familiar with Jeff and the C2C team (i've heard great things) and work primarily with Fernandos team who I love.

    Right now - all of the padsplit loans I am working on for my clients are underwritten based off long term rental rates. Getting a DSCR of 1 in some of the higher tax counties of Georgia is tight, but we've been able to get through them. Finding another end lender that can underwrite based off actuals would add a lot of liquidity to the space.

    4Reply
  • Jarrod Ochsenbein
    Rental Property Investor · Oregon/Arizona · Member since 2023 · 124 posts · 79 votes
    1y
    Quote from @Jean Brune:
    Based on the responses, it looks like you're in good hands Bob! I would highly recommend talking to Jeff Weller at Coast 2 Coast and Fernando Corona both are also PadSplit hosts but we're some of the first expert lenders . Here's a link to both of their PadSplit stories:
    Jeff: https://www.padsplit.com/host-resources/case-studies/jeff-we...
    Fernando: https://www.padsplit.com/stories/hosts/fernando-and-amaris-c...

    Quote from @Bob Willis:

    I am interested in talking to someone about the process of funding via DSCR the acquisition of a property currently being run as a PadSplit. The plan is to keep operating the property as a PadSplit post-acquisition. What kind of seasoning is generally required as it relates to the rents/revenue as it relates to servicing the note, etc...

    I currently own one PadSplit (acquired via Subject-to) that has been up just over a month. And the plan is to convert an existing Airbnb I own (and have run as an Airbnb since 2019) to PadSplit. This conversion will begin at the end of the month.

    I am just sharing the above to give context to my level of experience with this type of investment.

    I look forward to hearing from you all.



    0Reply
  • Bob Willis
    OP
    Investor · Curtis, NE · Member since 2019 · 231 posts · 140 votes
    1y
    Quote from @Josh Bowser:

    Gang - I love the back in forth on this thread and looks like this post keeps getting responses!

    If anyone has an end lender that has successfully closed a handful occupied padsplit loans and can underwrite based off actual padsplit rents I would really appreciate an intro. I'm familiar with Jeff and the C2C team (i've heard great things) and work primarily with Fernandos team who I love.

    Right now - all of the padsplit loans I am working on for my clients are underwritten based off long term rental rates. Getting a DSCR of 1 in some of the higher tax counties of Georgia is tight, but we've been able to get through them. Finding another end lender that can underwrite based off actuals would add a lot of liquidity to the space.

     What you say here @Josh Bowser

    0Reply
  • Michael Swisher
    Lender · Dallas, TX · Member since 2025 · 5 posts · 1 vote
    1y

    Hello. Can anyone on this thread recommend a DSCR lender who allows Padsplits?

    I'm a mortgage broker, so need a wholesale lender. 

    Have a current cash out refi DSCR loan but my lenders won't approve because property is being used as padsplit. Already have an appraisal that puts our DSCR rate at .85 using long term rent estimate. Owner setup the path split last month, so don't have income history.

    0Reply
  • Josh Bowser
    Real Estate Agent · Atlanta, GA · Member since 2020 · 414 posts · 233 votes
    1y
    Quote from @Michael Swisher:

    Hello. Can anyone on this thread recommend a DSCR lender who allows Padsplits?

    I'm a mortgage broker, so need a wholesale lender. 

    Have a current cash out refi DSCR loan but my lenders won't approve because property is being used as padsplit. Already have an appraisal that puts our DSCR rate at .85 using long term rent estimate. Owner setup the path split last month, so don't have income history.


     Sent you a PM!

    0Reply
  • Leslie Beia
    Investor · Austin TX · Member since 2021 · 49 posts · 26 votes
    1y

    I am working with Michael Kingen at Coast to Coast Mortgage, I know they do DSCR's based on Padsplit specifically.

    4Reply
  • Michael Swisher
    Lender · Dallas, TX · Member since 2025 · 5 posts · 1 vote
    1y

    Thanks! I'll reach out. 

    0Reply
  • Jarrod Ochsenbein
    Rental Property Investor · Oregon/Arizona · Member since 2023 · 124 posts · 79 votes
    1y
    Quote from @Michael Swisher:

    Hello. Can anyone on this thread recommend a DSCR lender who allows Padsplits?

    I'm a mortgage broker, so need a wholesale lender. 

    Have a current cash out refi DSCR loan but my lenders won't approve because property is being used as padsplit. Already have an appraisal that puts our DSCR rate at .85 using long term rent estimate. Owner setup the path split last month, so don't have income history.


     Reach out to Fernando Corona here: 

    https://lending.itsfernandocorona.com/dscr-brrrr-calculatorGet my DCSR Refi BRRRR calculator for RE deal analysis
    1Reply
  • Jesse R Wien
    Lender · Arizona/Wisconsin · Member since 2022 · 17 posts · 3 votes
    1y

    I financed a 10 bed 4 bath padsplit property.  Happy to help!

    0Reply
    • Bob Willis
      OP
      Investor · Curtis, NE · Member since 2019 · 231 posts · 140 votes
      1y
      Quote from @Jesse R Wien:

      I financed a 10 bed 4 bath padsplit property.  Happy to help!


       Did you value based on PadSplit revenue, or traditional LTR revenue?

      0Reply
    • Jesse R Wien
      Lender · Arizona/Wisconsin · Member since 2022 · 17 posts · 3 votes
      1y
      For this one the income was based on LTR from the appraisal report because the owner had it less than 12 months and simply those numbers worked for this situation, so it wasn't a big deal.  If we have a 12 month history of the income, we can use the padsplit income.  

      Quote from @Bob Willis:
      Quote from @Jesse R Wien:

      I financed a 10 bed 4 bath padsplit property.  Happy to help!


       Did you value based on PadSplit revenue, or traditional LTR revenue?


      1Reply
    • Bob Willis
      OP
      Investor · Curtis, NE · Member since 2019 · 231 posts · 140 votes
      1y
      Quote from @Jesse R Wien:
      For this one the income was based on LTR from the appraisal report because the owner had it less than 12 months and simply those numbers worked for this situation, so it wasn't a big deal.  If we have a 12 month history of the income, we can use the padsplit income.  

      Quote from @Bob Willis:
      Quote from @Jesse R Wien:

      I financed a 10 bed 4 bath padsplit property.  Happy to help!


       Did you value based on PadSplit revenue, or traditional LTR revenue?



       Now that's an answer I like.

      1Reply
    • Josh Bowser
      Real Estate Agent · Atlanta, GA · Member since 2020 · 414 posts · 233 votes
      1y
      Quote from @Bob Willis:
      Quote from @Jesse R Wien:
      For this one the income was based on LTR from the appraisal report because the owner had it less than 12 months and simply those numbers worked for this situation, so it wasn't a big deal.  If we have a 12 month history of the income, we can use the padsplit income.  

      Quote from @Bob Willis:
      Quote from @Jesse R Wien:

      I financed a 10 bed 4 bath padsplit property.  Happy to help!


       Did you value based on PadSplit revenue, or traditional LTR revenue?



       Now that's an answer I like.

      This is my favorite answer I've seen - Jesse I need to chat with you!
      0Reply
  • Bernadeau C.Pro Member
    Rental Property Investor · Orlando, FL · Member since 2014 · 540 posts · 230 votes
    1y

    i can take a look at this and I'll be happy to help. send me a DM

    0Reply
  • Deven Ziertman
    Member since 2025 · 77 posts · 15 votes
    1y

    PadSplit properties are financeable but tricky for many DSCR lenders. They often use market rents (1007) for DSCR, which can affect qualification. Some niche lenders offer no-ratio DSCR loans with lower LTV. Since PadSplit revenue is based on occupancy, stable income is harder to document without 12+ months of consistent collections. Consider using a bridge loan to acquire and refinance into a DSCR loan once income is verified. The right lender and structure make these deals possible!

    2Reply
  • Puja Varude
    Member since 2026 · 13 posts · 4 votes
    9mo
    0Reply
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