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Updated over 6 years ago on . Most recent reply

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Christopher B.
  • Investor
  • Southeast, MI
184
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425
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Down Payment Assistance included in DSCR?

Christopher B.
  • Investor
  • Southeast, MI
Posted

Hi,

I am putting together a multi-family deal. I am planning to have part or all of the down payment provided by a private investor, which I will pay interest to, and refinance after a few years, once I add value, and then payoff the investor in full.

My question, is assuming a bank allows a borrowed down payment (I found some that do, and some that don't), should I expect them to include the down payment in the DSCR, since it's borrowed?

This would be a commercial real estate loan.

Most Popular Reply

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Joel Owens
Agent
Pro Member
  • Real Estate Broker
  • Canton, GA
11,257
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Joel Owens
Agent
Pro Member
  • Real Estate Broker
  • Canton, GA
ModeratorReplied

Lender will look at what income is TODAY and stabilized revenue stream over the last 12 to 24 months. Value add and turn around is hypothetical. That situation may not happen at all or not go as planned.

That DSCR is too thin. I do not know any lender that would touch that on most properties. Any little blip happens and the property could instantly be cash flow negative.

With true value add properties a typical structure is interest only on the loan so payments are minimal while injecting capital and stabilizing the property.  An owner typically cares less about principal pay down when stabilizing.

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