DSCR "Rural" lending

Member since 2019 · 40 posts · 42 votes

So I have been having a lot of trouble getting a cash out loan on one of my properties I own outright, and I thought DSCR lending was going to be my saving grace. Well turns out pretty much my entire investing area is considered "rural" even though this specific property is right in the middle of a 30,000 population town and most DSCR lenders will not loan on it because of this. Has anyone ever found a way around this as I really need this to happen if I am going to scale. Conventional lending is not really an option as I am a college student and dont have much W-2 income at this time.

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Stephanie P.Pro Member

Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes

Quote from @Tanner Johnson:

A town with a population density of 30K is not rural whether it's a DSCR loan or not. You may have a unique property.

Many DSCR lenders use idcide.com for their rural designations. If a property is in a town of 25K people or more, it's not rural. If it's in a town of less than 25K people, but it's within 25 miles of a town of 100K people, then it's not rural. If it's less than 25K people and it's more than 100K people, then it's rural.

Rural doesn't necessarily preclude a property for many lenders, but it will reduce the ltv (typically to 65%).

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Jay HurstBusiness Member
Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
3y
Quote from @Tanner Johnson:

So I have been having a lot of trouble getting a cash out loan on one of my properties I own outright, and I thought DSCR lending was going to be my saving grace. Well turns out pretty much my entire investing area is considered "rural" even though this specific property is right in the middle of a 30,000 population town and most DSCR lenders will not loan on it because of this. Has anyone ever found a way around this as I really need this to happen if I am going to scale. Conventional lending is not really an option as I am a college student and dont have much W-2 income at this time.

@Tanner Johnson Surprised a town of 30k would be considered rural. Where is it?
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David Lambert
Member since 2022 · 41 posts · 20 votes
3y
When lenders use the term "Rural" it can be very frustrating for a borrower because the term is rarely clearly defined. It can also mean different things to different lenders. Even if the property is centered in a city with a population of 30k it may be considered rural due to other factors. Underwriters will look at the population density of the surrounding area. They will also see how far away it is from a large metropolitan area.
Underwriters want to see that the property is in an area that will support the valuation of the property with numerous comps so they can have confidence in the appraisal. They also want to see that there will be a thriving rental market to support the property and that it is in an area with growth in case you need to sell the property.
Providing a location for your property will help us understand the issue better. Also, how does the property cashflow? How much in reserves do you have? How many properties do you have in your portfolio? Are any of those properties in this area? All of this information would be important for an underwriter when considering a rural property.
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Stephanie P.Pro Member
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
3y
Quote from @Tanner Johnson:

So I have been having a lot of trouble getting a cash out loan on one of my properties I own outright, and I thought DSCR lending was going to be my saving grace. Well turns out pretty much my entire investing area is considered "rural" even though this specific property is right in the middle of a 30,000 population town and most DSCR lenders will not loan on it because of this. Has anyone ever found a way around this as I really need this to happen if I am going to scale. Conventional lending is not really an option as I am a college student and dont have much W-2 income at this time.

A town with a population density of 30K is not rural whether it's a DSCR loan or not. You may have a unique property.
Many DSCR lenders use idcide.com for their rural designations. If a property is in a town of 25K people or more, it's not rural. If it's in a town of less than 25K people, but it's within 25 miles of a town of 100K people, then it's not rural. If it's less than 25K people and it's more than 100K people, then it's rural.
Rural doesn't necessarily preclude a property for many lenders, but it will reduce the ltv (typically to 65%).
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Devin PetersonBusiness Member
Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 664 votes
3y
Are your referring to short term rental or long term lease property?
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Zach Edelman
Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
3y
Hello! I know of firms, such as my own, that can lend on rural properties just at reduced LTV. My firm specifically can do 65% LTV on rural properties across all transaction types.
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Brandi K.
Rental Property Investor · Member since 2018 · 56 posts · 38 votes
3y
@Tanner Johnson you should try a local bank and talk to their commercial lender.
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Stacy RaskinBusiness Member
Lender · Member since 2022 · 1k+ posts · 497 votes
3y
@Tanner Johnson, where is your property located?
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Tanner Johnson
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Member since 2019 · 40 posts · 42 votes
3y
Quote from @David Lambert:

When lenders use the term "Rural" it can be very frustrating for a borrower because the term is rarely clearly defined. It can also mean different things to different lenders. Even if the property is centered in a city with a population of 30k it may be considered rural due to other factors. Underwriters will look at the population density of the surrounding area. They will also see how far away it is from a large metropolitan area.
Underwriters want to see that the property is in an area that will support the valuation of the property with numerous comps so they can have confidence in the appraisal. They also want to see that there will be a thriving rental market to support the property and that it is in an area with growth in case you need to sell the property.
Providing a location for your property will help us understand the issue better. Also, how does the property cashflow? How much in reserves do you have? How many properties do you have in your portfolio? Are any of those properties in this area? All of this information would be important for an underwriter when considering a rural property.

It's in midwest Kansas, pretty far from any metropolitan areas, but the city has seen amazing growth in the last decade and I looked and population is around 29-30,000. The property is a brand new construction that I own outright and the rental market in this city is very strong as of now there is quite the shortage. The Dscr ratio is no problem, the only thing holding it back is the rural designation. It seems that the criteria they are using ( the consumer financial protection Breau) designates entire counties as "under served or rural".
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J. Mitchell Bernier
Lender · Southwest Georgia · Member since 2017 · 312 posts · 278 votes
3y
@Tanner Johnson Go and talk to the local credit unions and banks in the town or the neighboring town. You might not be able to get the full amount you were wanting back in the cash out, but I am willing to bet you could get something if you own it outright.
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David Lambert
Member since 2022 · 41 posts · 20 votes
3y
Quote from @Tanner Johnson:

Quote from @David Lambert:

When lenders use the term "Rural" it can be very frustrating for a borrower because the term is rarely clearly defined. It can also mean different things to different lenders. Even if the property is centered in a city with a population of 30k it may be considered rural due to other factors. Underwriters will look at the population density of the surrounding area. They will also see how far away it is from a large metropolitan area.
Underwriters want to see that the property is in an area that will support the valuation of the property with numerous comps so they can have confidence in the appraisal. They also want to see that there will be a thriving rental market to support the property and that it is in an area with growth in case you need to sell the property.
Providing a location for your property will help us understand the issue better. Also, how does the property cashflow? How much in reserves do you have? How many properties do you have in your portfolio? Are any of those properties in this area? All of this information would be important for an underwriter when considering a rural property.

It's in midwest Kansas, pretty far from any metropolitan areas, but the city has seen amazing growth in the last decade and I looked and population is around 29-30,000. The property is a brand new construction that I own outright and the rental market in this city is very strong as of now there is quite the shortage. The Dscr ratio is no problem, the only thing holding it back is the rural designation. It seems that the criteria they are using ( the consumer financial protection Breau) designates entire counties as "under served or rural".

There could be other factors but from the information provided we can often get a deal like this done. Would probably reduce leverage from 70% to 65%. If you want to discuss specifics feel feel to send me a PM. I can pull up the property and give you an idea of what we could offer.
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Kristen L GarnerBusiness Member
Lender · Phoenix, AZ · Member since 2021 · 451 posts · 287 votes
3y
Hi! I used to run into this issue a lot. My company now has two specific programs for rural DSCR though! So there are rural DSCR options available and the rates are not higher than non-rural DSCR.
[email protected]213-880-0434
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Stephanie P.Pro Member
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
3y
Quote from @Tanner Johnson:

So I have been having a lot of trouble getting a cash out loan on one of my properties I own outright, and I thought DSCR lending was going to be my saving grace. Well turns out pretty much my entire investing area is considered "rural" even though this specific property is right in the middle of a 30,000 population town and most DSCR lenders will not loan on it because of this. Has anyone ever found a way around this as I really need this to happen if I am going to scale. Conventional lending is not really an option as I am a college student and dont have much W-2 income at this time.

Is this the property that you built with a wooden foundation and what specific town is it in? Curiosity is getting the better of me and I want to check population density.
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
3y
Quote from @Tanner Johnson:

So I have been having a lot of trouble getting a cash out loan on one of my properties I own outright, and I thought DSCR lending was going to be my saving grace. Well turns out pretty much my entire investing area is considered "rural" even though this specific property is right in the middle of a 30,000 population town and most DSCR lenders will not loan on it because of this. Has anyone ever found a way around this as I really need this to happen if I am going to scale. Conventional lending is not really an option as I am a college student and dont have much W-2 income at this time.

There are DSCR lenders for rural areas. The LTV is cut at 70-65%.
[email protected]818-269-7983
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Stephanie P.Pro Member
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
3y
Quote from @Stephanie P.:

Quote from @Tanner Johnson:

So I have been having a lot of trouble getting a cash out loan on one of my properties I own outright, and I thought DSCR lending was going to be my saving grace. Well turns out pretty much my entire investing area is considered "rural" even though this specific property is right in the middle of a 30,000 population town and most DSCR lenders will not loan on it because of this. Has anyone ever found a way around this as I really need this to happen if I am going to scale. Conventional lending is not really an option as I am a college student and dont have much W-2 income at this time.

Is this the property that you built with a wooden foundation and what specific town is it in? Curiosity is getting the better of me and I want to check population density.

@Tanner Johnson Just checking in. Did you get a chance to see the questions above?
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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
DSCR and hard money stay away from areas that have a lack of comps. Use commercial lending.
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Jean Pierre Beltran
Rental Property Investor · New York, NY · Member since 2022 · 12 posts · 3 votes
3y
@Eliott Elias are there any type of commercial loans for single family short term rentals that you'd recommend? DSCR is the closest I've seen to something commercial
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Alex BekezaBusiness Member
Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
3y
@Tanner Johnson 30,000 pop sounds promising. What does the CFPB say? Here's a link to their rural search tool - https://www.consumerfinance.go....
As long as you have reasonably close comps and the CFPB says it's not rural you have a good chance of getting an appraiser to avoid checking the box for rural to appease DSCR lenders.
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Elisha Wellerstein
Member since 2019 · 1 post · 0 votes
3y
Quote from @Erik Estrada:

Quote from @Tanner Johnson:

So I have been having a lot of trouble getting a cash out loan on one of my properties I own outright, and I thought DSCR lending was going to be my saving grace. Well turns out pretty much my entire investing area is considered "rural" even though this specific property is right in the middle of a 30,000 population town and most DSCR lenders will not loan on it because of this. Has anyone ever found a way around this as I really need this to happen if I am going to scale. Conventional lending is not really an option as I am a college student and dont have much W-2 income at this time.

There are DSCR lenders for rural areas. The LTV is cut at 70-65%.

Do you do DSCR for rural properties that are 2+ acres?
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
3y
Quote from @Elisha Wellerstein:

Quote from @Erik Estrada:

Quote from @Tanner Johnson:

So I have been having a lot of trouble getting a cash out loan on one of my properties I own outright, and I thought DSCR lending was going to be my saving grace. Well turns out pretty much my entire investing area is considered "rural" even though this specific property is right in the middle of a 30,000 population town and most DSCR lenders will not loan on it because of this. Has anyone ever found a way around this as I really need this to happen if I am going to scale. Conventional lending is not really an option as I am a college student and dont have much W-2 income at this time.

There are DSCR lenders for rural areas. The LTV is cut at 70-65%.

Do you do DSCR for rural properties that are 2+ acres?

It would depend on the comps.
[email protected]818-269-7983
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Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
3y
Quote from @Elisha Wellerstein:

Quote from @Erik Estrada:

Quote from @Tanner Johnson:

So I have been having a lot of trouble getting a cash out loan on one of my properties I own outright, and I thought DSCR lending was going to be my saving grace. Well turns out pretty much my entire investing area is considered "rural" even though this specific property is right in the middle of a 30,000 population town and most DSCR lenders will not loan on it because of this. Has anyone ever found a way around this as I really need this to happen if I am going to scale. Conventional lending is not really an option as I am a college student and dont have much W-2 income at this time.

There are DSCR lenders for rural areas. The LTV is cut at 70-65%.

Do you do DSCR for rural properties that are 2+ acres?

DSCR Lenders are going to vary for acreage limits, but the general maximums are likely going to be between 2-10 acres
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Grailen Archie
Member since 2023 · 1 post · 0 votes
2y
Quote from @Kristen L Garner:

Hi! I used to run into this issue a lot. My company now has two specific programs for rural DSCR though! So there are rural DSCR options available and the rates are not higher than non-rural DSCR.

Hello Kristen, Can you help me with A DSCR In IN Max Cash Out Thanks
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Clayton Silva
Lender · CA · Member since 2018 · 637 posts · 393 votes
2y
We have access to DSCR lenders that can do rural properties. I am working on 3 rural cash outs right now actually. I know how frustrating it can be!
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Kristen L GarnerBusiness Member
Lender · Phoenix, AZ · Member since 2021 · 451 posts · 287 votes
2y
Quote from @Grailen Archie:

Quote from @Kristen L Garner:

Hi! I used to run into this issue a lot. My company now has two specific programs for rural DSCR though! So there are rural DSCR options available and the rates are not higher than non-rural DSCR.

Hello Kristen, Can you help me with A DSCR In IN Max Cash Out Thanks

Hi @Grailen Archie I also invest in Indiana for my personal portfolio! I sent you a DM to gather some more info on your scenario.
[email protected]213-880-0434
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Alan Santini
Member since 2022 · 21 posts · 5 votes
2y
Quote from @Kristen L Garner:

Hi! I used to run into this issue a lot. My company now has two specific programs for rural DSCR though! So there are rural DSCR options available and the rates are not higher than non-rural DSCR.

Hi Kristen, I know this is an old post but this is something I am looking at now as we pursue a transaction with seller-financing with a view to refinance later on with a DSCR. Do you guys operate in North Carolina? Thanks
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Alan Santini
Member since 2022 · 21 posts · 5 votes
2y
Quote from @Clayton Silva:

We have access to DSCR lenders that can do rural properties. I am working on 3 rural cash outs right now actually. I know how frustrating it can be!

Hi Clayton, I know this post is old but was curious to find out whether you guys do rural DSCR cash outs in North Carolina?
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