DSCR Rent appraisal - Montana

[Matt Hubert]

Hey all! Looking for some others experiences with rent income appraisal for qualifying a DSCR loan.... Have been under contract on a studio condo with DSCR loan and 25% down. Sales price appraised but the rent income did not meet the 1:1 requirement. We're stretched thin enough on this deal that I'm not considering putting additional down. We will try to negotiate price with the seller. This is our first investment going under contract so quite a learning experience.

Outside of putting more money down, or negotiating a lower selling price, what have buyers done to get to the finish line?

What are some rules of thumb during due diligence to avoid getting this far along only for it to fall through during appraisal?  We're out $$ for appraisal and inspection at this point.

[Zach Edelman]

Hey Matt -

Same questions as Robin regarding occupancy. Certain DSCR lenders will be able to underwrite an the lower of an increased percentage of market rent (110%, 125%, etc.) and the in-place rent if the property is occupied. This can allow for higher DSCR, which can allow for more LTV, and thus less down. Certain DSCR lenders can also underwrite properties that are going to be utilized as STRs with AirDNA projections rather than market rent which can mean they're underwriting with a higher DSCR, and therefore can increase LTV, and thus less down.