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Updated 3 months ago on . Most recent reply

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Colleen A Levitt
  • Real Estate Agent
  • Detroit, MI
4
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DSCR out of a DSCR?

Colleen A Levitt
  • Real Estate Agent
  • Detroit, MI
Posted

About 6 months ago we purchased a duplex using a DSCR loan. The original intention was to do a light cosmetic rehab and rent it out. We put 20% down at 8.25% on a property with a $136k purchase price. Loan is just over $108k. We could have rented it out for about $1600/mo. We decided to do a full rehab to get nearly double the rent ($2900)and increase the ARV to $260k. Can we DSCR out of this to get our money back out or will I need to sell it to get our $136k total investment out?

  • Colleen A Levitt

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Brittany Minocchi
  • Lender
  • Massillon, OH
470
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986
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Brittany Minocchi
  • Lender
  • Massillon, OH
Replied

Assuming the ARV you mentioned is accurate, at 75% LTV you'd be able to pull enough equity to cover your existing payoff, refi costs and walk away with a good chunk of cash in your pocket. If you don't need the extra money at closing and just want to pay off your current loan in hopes of a better rate, you could consider a rate term refi instead.

If you have a 3-2-1 prepay, you'd lose $3,240 paying off your current DSCR (this would apply to a refinance OR a sale). If you're keeping the property and renting it for $2,900/mo, you'll make that $3,240 back pretty quickly. I'd then look at the interest savings vs. the cost of the refinance + penalty and see how long it would take you to recoup those costs. 

I hope that helps :) 

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Brittany Minocchi - Barrett Financial Group, LLC
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