dcsr loan for sfr

[Carol Burns]

I am looking at a sfr.   Purchase price $240,000, rehab of $40,000, probably worth 320000 after rehab.  Looking to rent out for $2100/month.   Does a dcsr loan cover the rehab?   280,000 after rehab, 20 percent down, so would be financing 224,000.   And what are the rates now for dcsr loans?  How do I go about finding a lender?   TIA

[Angie Castro]

Hey Carol, DSCR will not cover the rehab only the purchase and the home needs to be considered habitable to pass the appraisal. Only loan that would cover your rehab is an FHA 203K (primary residence loan) OR hard money fix and flip loan and you would have to refinance later. I have seen some hard money loans for rentals that can cover the rehab but the rates and terms are terrible.

[Andy Bahr]

Quote from @Carol Burns:

I am looking at a sfr.   Purchase price $240,000, rehab of $40,000, probably worth 320000 after rehab.  Looking to rent out for $2100/month.   Does a dcsr loan cover the rehab?   280,000 after rehab, 20 percent down, so would be financing 224,000.   And what are the rates now for dcsr loans?  How do I go about finding a lender?   TIA

Hi Carlos!
I used to be a loan officer, however, I will for sure refer you to the experts as I have since transitioned to being a realtor! As a real estate investor in Charlotte, I have worked with Allen Marshall at David Greens's One Brokerage.
Allen's Phone is 707-481-8180. When I worked with them they were doing DSCR loans so hopefully they can help! I know regulations change almost by the quarter so what is true now is probably different last year.
Good Luck!

[Mike Klarman]

Carol, let's take a look at your deal:

240k purchase

40k rehab

320k ARV

You wanna BRRRRR it so first a bridge loan with rehab. You can get 70% - 75% of that 320k as a loan cap. So let's say 240k loan cap. Minus 40k rehab, leaves 200k toward the purchase which means you are 40k out of pocket.

Now the job is over and you go to refinance and the DSCR will be based on the rent which is 2100 which is less than that 1% rule and will limit your cashout ability. To maintain a 1.1 DSCR your loan payment must be no greater than 1,909/month. That will equate to like a 200kish loan amount. That means you need to bring another 40k to the table at the refi cause you'll have a bridge loan of 240k to payoff.

Now you'll own a 320k house with 80k equity in it making 150 cash/month.

You wanna look for better deal spreads. Make sure, if you can, that the total project cost is south of 70% of the ARV. If at all possible, that's where you wanna be.

[Heath Thomas Jr]

Agree with Mike that this deal probably doesn't make sense but on these tighter deals, particularly where you can get a little time, the Fannie Homestyle reno loan could be of use.

[Mark Munson]

Hi @Carol Burns

You can find lenders by using the Find a Lender tab up top of the BiggerPockets website. You can also find lenders by looking at your local real estate investor association website. DSCR does not cover rehab as mentioned above. You will need to utilize a fix to rent loan, then after the rehab is complete refinance into a DSCR loan. DSCR rates begin at about 6.5% and go all the way up to 9% or so, your rate is determined mostly by your credit score and the Loan to Value. Feel free to reach out if you need more advice, happy to help.

[Trent Jones]

Quote from @Carol Burns:

I am looking at a sfr.   Purchase price $240,000, rehab of $40,000, probably worth 320000 after rehab.  Looking to rent out for $2100/month.   Does a dcsr loan cover the rehab?   280,000 after rehab, 20 percent down, so would be financing 224,000.   And what are the rates now for dcsr loans?  How do I go about finding a lender?   TIA

 Carol, will send you a PM about some programs we could offer.

[Erik Estrada]

Quote from @Carol Burns:

I am looking at a sfr.   Purchase price $240,000, rehab of $40,000, probably worth 320000 after rehab.  Looking to rent out for $2100/month.   Does a dcsr loan cover the rehab?   280,000 after rehab, 20 percent down, so would be financing 224,000.   And what are the rates now for dcsr loans?  How do I go about finding a lender?   TIA

It will depend on what kind of rehab and if the property can currently be rented out to a tenant. If the property has deferred maintenance and is not up to standards to be rented out, you won't be able to finance this on a DSCR loan. You can however use a fix and rent loan to stabilize the property and then refinance into a DSCR loan. You will be able to finance 100% of the renovations as well.