Thoughts on Using DSCR Loans

[Deborah Wodell]

Hi fellow investors,

I've been hearing a lot about DSCR (Debt Service Coverage Ratio) loans lately, especially in the context of long-term buy-and-hold investments. For those of you who've used DSCR loans, I'd love to hear your experiences! Here are a few specific questions I'm curious about:

1. How does the approval process differ from traditional loans? Was it easier to qualify based on the property’s cash flow?
2. What kind of terms have you been able to secure? Are interest rates and loan-to-value (LTV) ratios competitive compared to conventional financing?
3. Have you noticed any challenges or downsides? For example, are lenders stricter about DSCR ratios, or do they require higher reserves?
4. How has using DSCR loans impacted your overall cash flow and ability to scale? Did they allow you to grow your portfolio faster than traditional financing would?

I'm thinking about recommending DSCR loans to some of my clients who are buy-and-hold investors, but I want to make sure I've got the full picture. Would love to hear your insights, tips, or any lender recommendations you've had success with!

Looking forward to learning more from your experiences!

[River Sava]

Hey Deborah, DSCR loans are a great tool espeically for buy and hold investors.

The approval process is primarily based on the property’s cash flow, not you as the borrower, which can make it easier to qualify, especially if your rental property is performing well

As far as terms, some lenders can go up to 85% LTV for rate term refis and aquisitions. Cash outs are typically at 75% LTV. Rates are typically in the 6's right now give or take.

As for challenges, make sure you know if the proprety is rural or not because that will likely affect LTV. Also, some lenders can do "no ratio" dscr loans but cash flow does play big part in pricing so keep that in mind.

Overall, DSCR loans have been a game-changer for many investors in terms of scaling their portfolios. Since the qualification is based on the property's income (no DTIs/personal income), it can allow you to grow your portfolio faster than traditional financing might.

Check out this article for more info: https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...

Happy to connect and discuss further!