Best DSCR Loan options/companies for my situation

[Rhett Kelton]

I'm moving away from conventional loans and into commercial loans. I think I would like to get a DSCR loan for a couple of BRRRR deals, and wanted some recommendations about who and who not to try.

One of the properties is a SFR with a DADU (making it a little hard to appraise via sales approach in my area). The second is a 5-unit multi-family. (5 separate electric and water meters) Depending on appraisal method (income vs sales), I should be able to pull almost all my cash out at 75% ARV on both properties. The DSCR ratios should also be between 1.25-1.50. Both are full with current leases between 8-14 months. My credit score is 740+. I have 4 other rentals within 2 miles.

Recommendations?

[Stephanie P.]

@Rhett Kelton

You've got a couple things going on here.  If you have a single family property or a 2 unit in your case, the sales approach will be used.  They'll get a form 216 for comparable rent schedules and have to make an adjustment if they can't find comps with a DADU.

The 5 unit limits the number of lenders you can use for DSCR. A few lenders don't care if it's up to 8 units or so as a regular residential property and others won't touch it if there are more than 4 units. That limits your flexibility and frankly, some of the lenders that will do it as a 5+ unit property are slow, limit your LTV to 75% (although all you need is 75%, so you should be good if the value comes in) and are pricey. The appraisal you use will be a commercial appraisal with emphasis on the income approach with comparable sales used as an information tool rather than a way to derive value that's useful. Those appraisals are certainly more costly than a standard appraisal with a 216.

You should be able to do both loans with the same lender.

Hope that gives you a little insight.

Stephanie