All Forum Posts by: Steele Kruzel

@Steele Kruzel everyone who has posted above has covered good ground for you on ways they could help with your conventional refi. Though the fees on DSCR are higher, that's what I opted for recently on a purchase deal of my own when compared to conventional. 

The 7.125% conventional rate (at 75% LTV) vs. a 6.50% DSCR rate (at 80% LTV) was good math on my short-term rental. Here's what the refi could look like on a 90-day seasoning program that Indianapolis investors are using.

I have found success stories with these smaller banks when you go to the outskirts of central IN. Such as lizton state bank, etc....check around the brownsburgs, westfields, shelbyvilles, etc...

I'm working on Welcome Packages for new tenants that include a small basket of gifts like soaps, shower curtain rings, flowers, etc. The house rules and maintenance procedures will also be in there (kind of similar to what you may have seen in the past with Airbnbs) and a list of emergency numbers, closest medical, fire, and police, etc. What do you think would be something great to go in there? Budget is about $100 per basket. I've thought about a small tool kit with a small hammer and some little nails to get things hung up on the wall. Also looked at small toys for any children coming in. 

There are DSCR investment property cash out refinances that will go up to 80% on a cash out refinance but the rate will go up (sometimes 1% higher) and usually require a 1.2 to 1.25 DSCR ratio instead of a DSCR 1 ratio. Some properties can hit those numbers and some can't.

More on DSCR loans in case helpful: 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.

Happy to discuss further. 

Hey Steele - While some lenders may offer 80% LTV, it's typically a more challenging qualification process, so just keep that in mind. Also, be cautious of anyone offering terms that seem too good to be true—there can be scams out there. Most DSCR lenders are capped at 75% LTV to manage risk and ensure they're not overleveraging loans, which is especially important in today's market.

Go to any of the large, national hard money lenders, including the ones which advertise here on BP. I've been doing 80%s for the last 4 years, including COVID pull-back times. Rates do come up a touch vs 75%, but immaterial at the moment from the quotes I'm getting.

Is the house rented?  

I'll send you a DM for a contact. How is the BRRRR market in Indy?