DSCR LOAN question

[Shaydon Childers]

I am looking at an off market deal to help a neighbor and make a long term investment. My neighbor needs to sell and doesn't want to move. I wanted to propose he sell to me at a 20% discount and I would lease it back to him for an extended period of time. 

Home Value 510K

Purchase 400K

How can I leverage the instant equity instead of making a down payment? I was told I need 15-20% down for a DSCR even with the discounted price. If you buy with another loan type could you refinance into a DSCR at 80% LTV and not have to make a down payment? If someone can tell me how to do this deal with less that 20K out of pocket I would appreciate the help. Loan assumption isn't an option here. My DTI is maxed out too. The lease he signs if done will meet the debt service on the loan or I wont make the deal.

[Robin Simon]

Quote from @Daniel Gugliotti:

This thread is super helpful, thanks Shaydon for asking the question! I am in a similar scenario, but I also do not have a current home to sell. I am looking to so a rehab loan (which I have heard also be called a bridge loan). I was under the impression the bridge loan could be your down payment until you can close on the DSCR/conventional mortgage and then the cash refi makes the lender whole on the bridge loan. But it sounds like with the rehab loan, I am still coming up with 25-ish% as DP for this loan, correct? Thanks all!

Daniel - it would still be two separate loans - one for the purchase/rehab and then a separate DSCR Loan for the Refinance. You can probably secure the hard money with less than a 25% down payment, and then if things go right - 0 out of pocket on the refinance, but you will still need at least some "skin in the game" regarding a little equity/down payment to start.

Sharing this article published here on BP last year on this topic - hope it can help too!

https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...