Certainty of DSCR lending?

[Robert M.]

I have the opportunity to purchase two short-term rental properties that will perform very well.  I’ve been looking for this exact property prototype for almost a year, so I hate to pass them by.  That said, I am also currently building a property that I’ll need to refinance in the next few months (it’s in a construction loan with a balloon payment), and I can’t risk messing up the qualification on the refinance. 

Thus far in my investing journey, I've used only conventional lending. Buying these two properties now means I will need to rely upon DSCR or private options for the refinance on my property that's under construction. My risk tolerance is usually pretty decent, but given the stakes (of being unable to find alternative financing), I can't seem to mentally let go of conventional lending options.

The risks I anticipate are: 1) Credit score will drop with a lot of activity in a short time (though I don’t know how much), 2) The properties are pretty rural, so appraisals could be low or lenders may offer lower LTVs because of the rural classification, and 3) Sudden market shifts could make lenders skittish about vacation rentals, making it more difficult to secure non-conventional lending.

My questions are: 1) How confident can I be that I will be able to secure a DSCR loan? 2) Under what circumstances will a DSCR loan NOT be made (and is the rural nature of the property a concern)? 3) Aside from local banks (which I've checked), where else should I look for lending options on short-term rentals?

Thanks in advance!

[Nick Velez]

@Robert M.

DSCR loans are fairly easy to get as long as you have good credit and the property fits within the guidelines that the lender sets. Most lenders want to see that the rent that the appraiser says is the market rent, is enough to cover the PITI. It is still possible to secure a DSCR loan when the market rent is lower than the PITI, but you get some less favorable terms. If the property is indeed rural, it will be more difficult to get a DSCR loan but not impossible. A lender that we use, will lend on a property that the appraiser deems rural, but only up to 70% LTV where as with a purchase in town, you can go up to 85% LTV. Hope this was helpful and good luck!