Insight on DSCR vs standard commercial cash out refi

[Jordan Holt]

I am just finishing up a rehab and its about time to get my hard money lender paid back, and get the money I put into the deal back out to rinse and repeat. The property is in my LLC and I am trying to figure out if I want to do a DSCR loan or do a commercial cash out refi. I don't really know much except the very basic things about a DSCR loan. Does it allow me to get cash back? Or just pay off the previous lender?

I am all in (including my own money) about 230K. ARV for this house should be at minimum 300K but the house directly behind it just sold for 375K about 5 months ago. Rent is probably $2,000 but worst case scenario I have no problem knowing that I could get $1800.

thoughts?

[Alex Bekeza]

@Jordan Holt DSCR loans absolutely allow for cash out. It's the most common transaction we do. In fact, the commercial bank is the only one likely to have any limiting guidelines pertaining to LTC/cash out. Most DSCR lenders don't care about loan to cost once seasoned and just go off of the appraised value and cash flow. The only thing that could stop you from achieving cash out might be the DSCR itself on this one. It's impossible for me to calculate without knowing your expenses for taxes/insurance but even with low estimates this deal would be DSCR constrained with only $1,800 in rent. Getting that extra $200 in your lease agreement could be the matter of 10s of thousands of dollars higher in loan amount. With only $1,800, it does not appear it could debt service at $230,000. However, it could possibly with $2,000 pending costs for taxes/ins. I'm doing some very quick math using a 30 year fixed rate in the low 7s.