As long as the property generates enough cash flow to service the debt, you qualify—without the need for personal income verification.This type of loan is ideal for those serious about growing their real estate portfolio, especially if you’re self-employed or have irregular income streams.Why DSCR Loans Matter for Real Estate InvestorsWhen it comes to real estate investing, traditional loans can often be restrictive, requiring personal income verification and imposing limits on the amount you can borrow.

Assuming you can find a great fix-and-flip deal, you could borrow what you need from private lenders and not need a ton of cash (although you would need some money for the rehab).Also, has your bank told you what the specific credit requirements for their loan would be?

They are a great way to scale your business.They are asset-based loans as opposed to borrower based.

The line of credit would give full access to your equity instantly and you would only pay simple interest on the amount borrowed at any given time.

If there is a house with a detached ADU, if the main house was built prior to 1978, it is subject to rent control.A buyer can attempt the Ellis Act, which could take months (owner occupied loans generally require the borrower to move in within 60 days) and cost $20,000+.

I make sure (1) the borrower has a 10-20% (or more) down payment of his OWN capital invested (2) I understand time value of money and use a realistic and appropriate interest rate to determine the actual value of the note I’m holding and (3) obtain a personal guarantee unless the entity purchasing the property has financial strength in its own right (4) the lien I hold is in 1st position.

This disqualifies a lot of borrowers or makes the terms undesirable.Cheers!

What are the biggest challenges you face as a private money borrower?

Tell the truth, because if they are trying to purchase a home and a verification of rent is from a private party we'll ask for supporting documentation from the borrower anyways, as we know landlords may stretch the truth. 

Gave a higher LTV because we could cross collateralize against other propertiesEach deal is looked at differently when you are a smaller company and can work with a borrower as long as it works for both sides.