DSCR loans for $50-$80k purchase price

[Darnell Robinson]

Greetings! 

My partner and I visited Detroit MI this past weekend and found 2 deals:

TRIPLEX for $50k with ARV of $130k with one unit already rented at $1000 & the other two needing about $30k to rehab. Address is 13000 Plymouth Rd Detroit, MI 48227.

DUPLEX at $75k. Duplex, ARV $100-$127k both units empty, one is ready to rent and the other needs about $15k rehabs rents at $1200 per unit, per our agents MLS info. 12190 Santa Rosa Drive, Detroit MI 48204.

We've been trying to get a DSCR Loan but keep hearing the purchase amount is too low. Any suggestions?

[Ryan Stuckey]

Hi Darnell,

With rehab required, you don't need a DSCR loan yet. You need to find short-term purchase and rehab financing (i.e. hard money or private lender) to acquire and improve the property. When rehab is done and the project is market-ready, you can either sell it or hold/refinance with long-term DSCR financing based on the market rental income on the post-rehab condition. The good news is that purchase and rehab loan size minimums are lower than DSCR minimums.

DSCR is about long-term financing, not short-term purchase and rehab financing. There is no debt service coverage when a property is vacant/distressed and in need of rehab to produce a rental income situation.