Architect · Alexandria, VA · Member since 2016 · 317 posts · 371 votes
BP Community,
I've been working with two brokers for the last four weeks on a DSCR loan, but I still have nothing to show. Long story short:
1. My wife and I bought a property under an LLC. We converted a single-family residence into two condos.
2. We put the condos for sale this year and have had little to no interest. We decided to pivot and refinance the hard money construction loan with 13% interest. We removed the listing a month ago. I learned that trying to get financing after listing a property is hard to do.
3. The two units together should appraise between $1.6 to $1.7 million.
4. We will rent the bottom unit short-term and the upper unit rent per bedroom for medium to long-term stays. Both will be furnished. We should get around $12k per month. However, the market rate is lower, around $9k together.
4. The outstanding loan is around $1.2 million
5. Our credit scores are not good since we ran up the credit card to finish construction and furnish these units. My wife is around 700 depending on the credit reporting agency used. Mine is worse in the mid-600s.
6. In a perfect world, we get an LTV of 80% with an interest rate under 8%. Obviously, the lower the better.
7. Our hard money loan matures in the middle of June. We want the DSCR loan to close before then.
If there is someone who thinks they can help, please message me ASAP. If someone has any other ideas please let me know.
I've been working with two brokers for the last four weeks on a DSCR loan, but I still have nothing to show. Long story short:
1. My wife and I bought a property under an LLC. We converted a single-family residence into two condos.
2. We put the condos for sale this year and have had little to no interest. We decided to pivot and refinance the hard money construction loan with 13% interest. We removed the listing a month ago. I learned that trying to get financing after listing a property is hard to do.
3. The two units together should appraise between $1.6 to $1.7 million.
4. We will rent the bottom unit short-term and the upper unit rent per bedroom for medium to long-term stays. Both will be furnished. We should get around $12k per month. However, the market rate is lower, around $9k together.
4. The outstanding loan is around $1.2 million
5. Our credit scores are not good since we ran up the credit card to finish construction and furnish these units. My wife is around 700 depending on the credit reporting agency used. Mine is worse in the mid-600s.
6. In a perfect world, we get an LTV of 80% with an interest rate under 8%. Obviously, the lower the better.
7. Our hard money loan matures in the middle of June. We want the DSCR loan to close before then.
If there is someone who thinks they can help, please message me ASAP. If someone has any other ideas please let me know.
I appreciate the advice,
Eric
Hey Eric,
Let me cover a few things.
1. If the property is currently delisted, there are lenders that do not require a seasoning period to finance you. They will however go based on the lower of the listed price or appraised value (unless you are able to get an exception approved)
2. DSCR lenders are only going to underwrite this asset as an STR or LTR. Do you have any other short term rentals owned for 12 months? Lenders are going to want to see experience to use Short Term Rents.
3. Are you able to get an extension on your hard money loan? Is that $1,600,000 value a conservative estimate? What was it listed for and how long was it on the market?
4. Is there an HOA for the two condos? Is the property conforming to the current zoning? Do you have a certificate of occupancy and a rebuild letter from the city to verify that the property can be rebuilt as is?
Lender · Springfield, MO · Member since 2023 · 652 posts · 314 votes
1y
Hey Eric,
Just shot you a DM, and I'm sorry you've had some issues with this. I guess my primary question would be, in a perfect world, do you want to sell it or keep it? I think you have some options either way, but they would vary pretty considerably based on which way you wanted to go.
I've been working with two brokers for the last four weeks on a DSCR loan, but I still have nothing to show. Long story short:
1. My wife and I bought a property under an LLC. We converted a single-family residence into two condos.
2. We put the condos for sale this year and have had little to no interest. We decided to pivot and refinance the hard money construction loan with 13% interest. We removed the listing a month ago. I learned that trying to get financing after listing a property is hard to do.
3. The two units together should appraise between $1.6 to $1.7 million.
4. We will rent the bottom unit short-term and the upper unit rent per bedroom for medium to long-term stays. Both will be furnished. We should get around $12k per month. However, the market rate is lower, around $9k together.
4. The outstanding loan is around $1.2 million
5. Our credit scores are not good since we ran up the credit card to finish construction and furnish these units. My wife is around 700 depending on the credit reporting agency used. Mine is worse in the mid-600s.
6. In a perfect world, we get an LTV of 80% with an interest rate under 8%. Obviously, the lower the better.
7. Our hard money loan matures in the middle of June. We want the DSCR loan to close before then.
If there is someone who thinks they can help, please message me ASAP. If someone has any other ideas please let me know.
I've been working with two brokers for the last four weeks on a DSCR loan, but I still have nothing to show. Long story short:
1. My wife and I bought a property under an LLC. We converted a single-family residence into two condos.
2. We put the condos for sale this year and have had little to no interest. We decided to pivot and refinance the hard money construction loan with 13% interest. We removed the listing a month ago. I learned that trying to get financing after listing a property is hard to do.
3. The two units together should appraise between $1.6 to $1.7 million.
4. We will rent the bottom unit short-term and the upper unit rent per bedroom for medium to long-term stays. Both will be furnished. We should get around $12k per month. However, the market rate is lower, around $9k together.
4. The outstanding loan is around $1.2 million
5. Our credit scores are not good since we ran up the credit card to finish construction and furnish these units. My wife is around 700 depending on the credit reporting agency used. Mine is worse in the mid-600s.
6. In a perfect world, we get an LTV of 80% with an interest rate under 8%. Obviously, the lower the better.
7. Our hard money loan matures in the middle of June. We want the DSCR loan to close before then.
If there is someone who thinks they can help, please message me ASAP. If someone has any other ideas please let me know.
I appreciate the advice,
Eric
Happy to chat about this one more if you have time to connect. Can look at DSCR or bridge loan to float you until sale.
Architect · Alexandria, VA · Member since 2016 · 317 posts · 371 votes
1y
@Jeff Chisum yes we did to divide it into two units. The goal was to sell them so it made more sense to sell each one individually and not the building.
I've been working with two brokers for the last four weeks on a DSCR loan, but I still have nothing to show. Long story short:
1. My wife and I bought a property under an LLC. We converted a single-family residence into two condos.
2. We put the condos for sale this year and have had little to no interest. We decided to pivot and refinance the hard money construction loan with 13% interest. We removed the listing a month ago. I learned that trying to get financing after listing a property is hard to do.
3. The two units together should appraise between $1.6 to $1.7 million.
4. We will rent the bottom unit short-term and the upper unit rent per bedroom for medium to long-term stays. Both will be furnished. We should get around $12k per month. However, the market rate is lower, around $9k together.
4. The outstanding loan is around $1.2 million
5. Our credit scores are not good since we ran up the credit card to finish construction and furnish these units. My wife is around 700 depending on the credit reporting agency used. Mine is worse in the mid-600s.
6. In a perfect world, we get an LTV of 80% with an interest rate under 8%. Obviously, the lower the better.
7. Our hard money loan matures in the middle of June. We want the DSCR loan to close before then.
If there is someone who thinks they can help, please message me ASAP. If someone has any other ideas please let me know.
I appreciate the advice,
Eric
Hey Eric,
Let me cover a few things.
1. If the property is currently delisted, there are lenders that do not require a seasoning period to finance you. They will however go based on the lower of the listed price or appraised value (unless you are able to get an exception approved)
2. DSCR lenders are only going to underwrite this asset as an STR or LTR. Do you have any other short term rentals owned for 12 months? Lenders are going to want to see experience to use Short Term Rents.
3. Are you able to get an extension on your hard money loan? Is that $1,600,000 value a conservative estimate? What was it listed for and how long was it on the market?
4. Is there an HOA for the two condos? Is the property conforming to the current zoning? Do you have a certificate of occupancy and a rebuild letter from the city to verify that the property can be rebuilt as is?
1. That is what another broker told me. Good to know.
2. My wife and I have five other STR and have been doing them for eight years.
3. I can get an extension but they have another closing cost. Last time it was around $10k so I want to avoid that. The $1.6 is in the middle. Last year it was appraised for $1.8 million but it won't go for that now.
4. I'm an Architect and did everything. So condos recorded with the city, everything conforms to zoning, and CoO acquired.
@John O'Leary Thanks for your comment. I know 80% is probably too high but I figured I would ask with the reality that 75% is more likely. The $9k is if the units were unfurnished and rented to one person. If we use STR that goes up to $11k for both units. More likely higher.
1. That is what another broker told me. Good to know.
2. My wife and I have five other STR and have been doing them for eight years.
3. I can get an extension but they have another closing cost. Last time it was around $10k so I want to avoid that. The $1.6 is in the middle. Last year it was appraised for $1.8 million but it won't go for that now.
4. I'm an Architect and did everything. So condos recorded with the city, everything conforms to zoning, and CoO acquired.
@John O'Leary Thanks for your comment. I know 80% is probably too high but I figured I would ask with the reality that 75% is more likely. The $9k is if the units were unfurnished and rented to one person. If we use STR that goes up to $11k for both units. More likely higher.
You should be good at 80 LTV on a DSCR Rate and Term Refinance loan. If you need to close before middle of June, I would suggest starting something now. Appraisals usually take 5-7 days to complete. If title and insurance is completed then that should save some time as well.
Lender · Pittsburgh, PA · Member since 2024 · 63 posts · 20 votes
1y
Eric—sounds like you've put in serious work and just need the right lender to step in. I can technically do rate/term refinances up to 85% LTV as well as use STR AirDNA income projections on a DSCR loan, which sounds like there may be some alignment with what you're trying to do. I'm happy to chat and see if we can help you get it wrapped up before that June deadline. LMK!
Your best bet is to do a rate/term refinance with this one. You also, may be better off doing a reduced PP option with a DSCR loan to be able to refinance once you get your credit up a bit more. By reducing your PPP you will increase your rate slightly, but you'll be able to get a lower rate (given the market stays relatively steady) if you have a higher FICO and cashflow in the future. By going with a Rate/term you'll get more wiggle room on the amount you can draw given your existing payoff (Rate/term typically goes up 5% LTV from max cash-out). This also will have a lower interest rate than a cash-out does, and because you're taking just enough to cover your existing payoff and possibly closing costs then you'd have a lower monthly payment until you have your FICO and cash flow numbers where you want them.
If you want a rough idea of what this may look like I'd be happy to connect
Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
1y
Did you find a lender yet? I specialize in lending on STRs, so this sounds like something I can help you out with and get you high-leverage with solid terms.
Lender · Member since 2022 · 1k+ posts · 497 votes
1y
There are lenders that will do a refinance with a DSCR loan and will use short term rents to structure the loan (this depends on how long the property has been used as a short term rental and guidelines vary by lender). Most lenders will require the property to be off the market. For 1-4 units, most DSCR loans can be closed within 30 days or less if the borrower orders and pays for the appraisal in the beginning and is quick to respond to document requests.
I sometimes see condo HOA fees to be quite high so that is a consideration when structuring the loan. Also, sometimes information from a condo questionnaire that needs to be filled out along with all sending over the condo documents can impact the loan.
A 700 credit score is very doable for a DSCR loan. Lenders use your middle mortgage FICO score. There are even DSCR loan programs that go do down to a middle mortgage FICO score of 620. A lower credit score will result in a lower cap on the loan to value / LTV.
More on DSCR loans: DSCR loans won't use your income to underwrite the loan.
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. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.
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? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). 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. This criteria is for 1-4 and 5-8 unit programs.
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
If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
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.
Hey Eric — thanks for the detailed breakdown. You’ve done a lot of the heavy lifting already by converting and pivoting strategy, and it sounds like there’s solid equity in the deal.
A few thoughts:
DSCR lenders generally base LTV and rates on market rents, not projected STR or room-by-room figures. So if the market rate is $9K/mo, that's likely the number they'll underwrite against. That could affect your ability to hit 80% LTV unless you can show leases or STR income history.
Since time is tight and your credit is dinged, I'd suggest looking at non-QM lenders that are STR-friendly. Some lenders I've seen work well in these situations include The Mortgage Shop, Visio Lending, and Host Financial — they're experienced in STR/DSCR loans with flexible underwriting.
You might also want to bridge temporarily with a short-term refi or extension from your HML, especially if getting a DSCR closed before mid-June becomes tight.
Let me know if you'd like an intro to a DSCR lender with STR experience — I can help connect you to someone that moves fast.
Lender · United States · Member since 2020 · 1k+ posts · 499 votes
1y
I have STR lenders that'll go off the higher score borrower between you and your wife, but, a 700 score and $9k rent on a $1.7M property will not yield cash flow enough for 80%. 75% LTV is even questionable to be honest.
