DSCR Loans for Properties Worth Under 50K Each

[Andrew Hinspater]

Good evening to everyone! I'll keep this post short and sweet: We are currently buying two properties under 50K each, but total purchase price for both properties would be 80K. Unfortunately, we have seen that many lenders ask for 75K PP per property. Are there any 30 year DSCR or Portfolio loans that would fund such a deal? If not, are there any that would allow us to refinance with no seasoning afterwards? Thank you for your answers, and any other creative financing suggestions!

[Jason Wray]

Andrew,

As a Banker we are now seeing investors change their requirements to $125k minimum loan amounts. Reason is the lower loan amounts violate the "hard costs rule" which just means the banks/lenders cannot make its normal margins. Even though Non/QM is somewhat free from overlays it still have its normal TRID zero tolerance and other requirements.

If you are doing a DSCR for under $125K its not worth the loan if you can find it for a few reasons. The rate alone will be above 9% and in most cases its stops the property from DSCR cash flow ratio of 1.00% or higher depending on lender. You area also going to get hit with 2.75 points and a 2 or 3 year prepayment penalty.

My suggestion would be to take out a personal loan banks are offering personal loans now with no lien. If your credit score is above 700 and you can show a reasonable W2 or 1099 income they are not hard to get approved. That way there is No prepayment penalty and you can pay it off when you refinance the new home or other property.

The other suggestion would be to pull cash out of another property if you have equity primary home or other.  

[Brandon Croucier]

Nobody in the industry will do these, your going to need your rich uncle to step in & lend you capital, come up with cash, or pull equity from another source.

[Robin Simon]

This is too low value for any DSCR Lender I know of - vast majority of DSCR Lenders are at around $100k minimum loan amounts, some down to $75k and very rare but possible down to $55k - but this is loan amount not property value - so under $50k property value is basically impossible

This begs the question though - are these properties turnkey or need of renovations? At that value point, its hard to imagine they are in good shape - DSCR Loans are only for turnkey rentals - you might actually be looking for Hard Money for rehabs or a LOC

[Andrew Hinspater]

Hey Robin, yes we've found no DSCR that will go below 75K for the property value. The properties we buy are entirely turnkey and around the 40-65K range. FMR in our markets is around 900-1100 monthly for such properties, so the cashflow is there. We have the capital to buy properties but no way to refinance without waiting at least 6 months. I'm open to a portfolio loan for the properties but I haven't found any without seasoning or that will cash out. Are there any that you would be aware of?

It's frustrating that the only thing standing in our way from fast paced growth is the seasoning period on loans, if there is any sort of way to get around it we're more than open to trying the strategy out! 

[Brandon Croucier]

Quote from @Andrew Hinspater:

Hey Robin, yes we've found no DSCR that will go below 75K for the property value. The properties we buy are entirely turnkey and around the 40-65K range. FMR in our markets is around 900-1100 monthly for such properties, so the cashflow is there. We have the capital to buy properties but no way to refinance without waiting at least 6 months. I'm open to a portfolio loan for the properties but I haven't found any without seasoning or that will cash out. Are there any that you would be aware of?

It's frustrating that the only thing standing in our way from fast paced growth is the seasoning period on loans, if there is any sort of way to get around it we're more than open to trying the strategy out! 

 Just sent you a PM.

[Ray Hage]

Quote from @Andrew Hinspater:

Hey Robin, yes we've found no DSCR that will go below 75K for the property value. The properties we buy are entirely turnkey and around the 40-65K range. FMR in our markets is around 900-1100 monthly for such properties, so the cashflow is there. We have the capital to buy properties but no way to refinance without waiting at least 6 months. I'm open to a portfolio loan for the properties but I haven't found any without seasoning or that will cash out. Are there any that you would be aware of?

It's frustrating that the only thing standing in our way from fast paced growth is the seasoning period on loans, if there is any sort of way to get around it we're more than open to trying the strategy out! 

 I am a PML. I could lend some of the money on this for 6 months for the seasoning purposes (though it won't be cheap). Let me know. Maybe we can make a deal. I am currently in the St Louis area (O'Fallon specifically)