Dscr advice that y’all should jump on
Your broker just offered you a DSCR loan on a deal that doesn't cash flow and called it a win. You're about to find out whose win it actually was.
No-ratio DSCR loans don't require the property to cover the payment. 30-35% down. Higher rate. Lender is protected. Broker gets paid.
You're the one left feeding a property that was never structured to feed you back.
One vacancy. One repair. One soft rental market. Every shortfall comes straight out of your pocket every single month until you can't cover it anymore.
This product is real. Brokers are selling it as a creative solution. A deal that doesn't cash flow isn't a deal. It's a liability with a closing date.
Most Popular Reply
Ok, so I'm going to take the other side of this argument. A no ratio DSCR loan can come in handy and I can give you a specific example. I had a borrower in Texas who was having a hard time selling a property after renovations were completed. Rather than taking a default due to the loan maturing, they refinanced into a no ratio DSCR loan instead and converted the property into an Airbnb. The market rent would not have been enough to cash flow, but the Airbnb income was.
To your point, you don't generally want to use this option because it could be problematic, but it exists because sometimes, it's better than the alternative and it could buy the borrower enough to time to either get new higher paying tenants in or enough time to completely change the income strategy altogether. There is no magic bullet that works in all situations, but that's why we take the time to understand the specific scenario at hand and provide solutions on a case-by-case basis.
- Reggie Nworie