Using a DSCR loan you can purchase a 2nd property with no problem.
Debt Service Coverage Ratio (DSCR) loans are essential tools for real estate investors (even if you are new) and businesses aiming to secure financing based on their cash flow. Unlike traditional loans, DSCR loans focus primarily on your property’s income rather than your personal income. Here’s a breakdown of how they work, their benefits, and how to calculate your DSCR effectively.
What Is A DSCR Loan?
About The Program:
Rental: Our DSCR rental loans allow investors to grow their rental portfolios quickly with 30-year, fixed-rate financing. Also called “buy and hold” loans, this program requires little documentation and no prior real estate investing experience. Borrowers are qualified mainly on the property’s income/debt service coverage ratio (DSCR). This loan program can be used to purchase a property, refinance an existing property, or perform a cash-out refinance to access existing equity.
Many of our borrowers employ the “BRRRR (Buy, Rehab, Rent, Refinance, Repeat) Method” of real estate investing, using our bridge financing program in conjunction with our DSCR rental program. Our Bridge loans provide financing for the purchase and rehab, and our DSCR program offers great 30-year terms when refinancing a newly renovated property into a passive income-producing rental property.
A DSCR loan measures your ability to cover debt obligations through the income generated by your investment property. This type of loan is popular among real estate investors who prefer a loan that evaluates the property’s performance rather than their personal financial history.
Lenders calculate your DSCR to determine whether your property can generate sufficient income to repay the loan. A higher DSCR signifies lower risk for lenders, making it easier to secure favorable loan terms.
How To Calculate DSCR
To calculate your DSCR, you’ll need two key numbers:
Net Operating Income (NOI): The total income your property generates minus operating expenses (e.g., property management fees, taxes, and maintenance costs).
Debt Service: The total annual loan payment, including principal and interest.
DSCR Formula: DSCR=Net Operating Income (NOI)Debt Service
If you would like to explore purchasing a rental property and you already have a owner occupied property reach out to get started. NowICanOwn.com
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