Has anyone had success getting a DSCR loan based on the as-is appraised value rather

Question

I’m considering buying a rental-ready, off-market property. It’ll likely appraise around $385K, but I may be able to purchase it for $270K–$300K. Since it doesn't need any work to rent, I’m exploring DSCR loan options and ideally looking for 80% LTV based on the appraised value, and not just the purchase price. So it'll function more like a BRRRR without needing a rehab.

Has anyone structured a deal like this successfully? Any lenders you'd recommend who do this? Would love to hear your experience or suggestions.

Thanks ahead!

AJ Exner · Answer

Hey Emmanuel

Have you considered treating this as a modified-BRRR strategy? Attack it with a small rehab-bridge loan (coat of paint, fix some drywall, clean up landscaping/curb-appeal, etc.) to increase leverage and reduce your down payment.

Then refinance it after a couple of months at the true "ARV" where you should be in position to at least rate and term at 80%. It could ensure that you've minimize your cost-basis while getting what sounds like a good property that should give you some good equity for a long time.

That seasoning period should suffice in letting it 'appreciate' to its actual value and put you in a great position.

Chris Seveney · Answer

The answer is No - a DSCR lender is an institutional lender that goes by pretty strict guidelines so they can securitize the loan just like banks do with home mortgages - therefore they go by the lower of purchase price or appraised value. So even though you can get it for $100k less, DSCR lender is going to look at it from the purchase price.

Margie Cindy Santos · Answer

Hi Emmanuel, DSCR lenders I know of, always go off of lower of purchase price and as-is value. You could purchase with hard/private money (for example 10% down), put a bit of rehab, then immediately cash out refinance at 75-80% value to recoop all your initial investments.

Steven Goldman · Answer

Without adding value through rehabilitation, you will not circumvent the required skin in the game. One of the issues you will encounter will be the appraiser's tendency to use the previous purchase price as a guideline to determine present value. While you might believe the appraised value is much greater than the seller's ask, the appraiser has the contract and uses it as a guideline to determine value. If you perform a refresh and wait the required seasoning period, you will get greater value from a refinance. Good luck.

Joyce Ann Magallanes · Answer

Hi Emmanuel! Yes, we do DSCR loans with a minimum 1.0 DSCR ratio, using market rents based on the appraisal. What’s the current DSCR on this property?

Erik Estrada · Answer

Most DSCR lenders are going to base it off the lower of the two. If you are trying to work out a lower downpayment, you could do 10% down if the seller is willing to finance you in second position.

There are also 85 LTV DSCR loans available.

Deven Ziertman · Answer

Yes, you can get a DSCR loan based on the as-is appraised value if the property is rental-ready. Some lenders use market rent comps to underwrite, even without a lease. If needed, consider a bridge loan for minor improvements before refinancing.

Emmanuel Duah · Answer

Thank you for the feedback everyone! I'm going to try for a bridge loan first to secure it, and then cash out refi after some light work to reach target ARV.

Rene Hosman · Answer

@Emmanuel Duah Actual DSCR guidelines are pretty strict from my understanding however when I went looking for a DSCR loan for my last project I found a lender here on BiggerPockets https://www.biggerpockets.com/business/finder/lenders and when I explained what the situation was and what I was looking for, they didn't recommend an actual DSCR loan but I got a different type of investor loan that worked out even better

Adam Corrigan · Answer

There are some lenders that will allow for a loan to value up to a capped loan to purchase calculation. For example, 75-80% LTV up 85% LTP, effectively making your down payment 15%. Anything below a 15% down payment is going to come with much higher rates and require a seller to carry a second mortgage. For example, 75% bank loan, 15% seller second and 10% buyer down payment.

Has anyone had success getting a DSCR loan based on the as-is appraised value rather

Has anyone had success getting a DSCR loan based on the as-is appraised value rather

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