Benefits of DSCR Rental Loans
DSCR Rental Loans
Here are a few of the many benefits of DSCR Rental Loans for real estate investors building a portfolio of rental investment properties.
What is a DSCR Rental Loan
First of all a DSCR Rental loan, or debt service coverage ratio loan, is a type of non-QM business purpose loan that is specifically designed for real estate investors. DSCR loans are based on the borrower’s ability to repay the loan based on the cash flow from the investment property, rather than the borrower’s personal income. This is one of the major benefits of DSCR Rental loans. This is why they a good option for real estate investors who have a strong cash flow from their investment properties but may not have a high personal income.
Benefits of DSCR Rental Loans
DSCR loans can be a great option for real estate investors who are looking to build a portfolio of investment properties. Here are some of the benefits of DSCR Rental loans for portfolio building:
- Easier to qualify for. DSCR Rental loans do not require lenders to verify the borrower’s personal income, which can make them easier to qualify for as compared to conventional loans. This is especially beneficial for real estate investors who have a low personal income or who have multiple investment properties and are nearing the debt-to-income limit for conventional loans.
- Higher loan amounts. DSCR loans typically have higher loan amounts than traditional loans, which can give real estate investors more buying power when they are looking to acquire new investment properties.
- Purchase additional Properties. Other Benefits of DSCR Rental loans include the ability to buy more properties because each loan is based on the cash flow of an individual property not the individuals income.
- Liability Protection for the Owner. DSCR loans are usually made to a business entity, such as a LLC. As such, this provides limited liability the owner in case of law suits. The liability is generally limited to the business assets, not personal assets.
- Credit Protection for The Owner. Business purpose loans are made to the business that generally require a personal guarantee. This one of the Benefits of DSCR Rental Loans because the loan does not negatively impact the borrowers debt ratio. This can affect the borrowers ability to qualify for some personal credit.
- Additional Tax Benefits. As a business purpose loan there are additional tax benefits of DSCR Rental loans.
- No Limit to number of properties financed. Conventional loans limit the number of properties a borrower may have financed. Regardless if the properties cash flow, the borrower has great credit, the borrower has great income or the borrower has great reserves they would not qualify for additional financing to build their real estate portfolio.
Overall, DSCR loans can be a great option for real estate investors who are looking to build a portfolio of investment properties. They offer a number of benefits that can make it easier for investors to qualify for loans, get higher loan amounts, pay lower taxes, and have greater personal liability protection.
Disadvantage of DSCR Rental Loans
Here are some additional things to consider when using DSCR loans in comparison to conventional loans for portfolio building:
- DSCR requirements. The program terms vary and are many different DSCR requirements, so it is important work with someone who understands your needs and offers the best options for you..
- Property type. DSCR Rental loans are for one to four unit investment properties. Not all properties are eligible for DSCR loans. The property must generate positive cash flow.
- Loan amount. The maximum loan amount for a DSCR loan will vary depending on the program but will generally go to $2,000,000 to $,4000,000 or more.
- Interest rates. DSCR loans typically have higher interest rates than conventional loans.
- Closing costs. DSCR loans can have higher closing costs than conventional loans.
It is important to carefully consider all of these factors and compare them to the benefits of a DSCR Rental Loan for portfolio building.
FBC Funding Specializes in DSCR Rental Loans. We offer many programs and options for real estate investors.
To learn more about the benefits of DSCR Rental loans to you call 888-848-3114
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