🧾🏢 DSCR Loans 101: What They Are and Why Real Estate Investors Love Them 💼📈

💰📊 DSCR Loans Explained: Why They’re the Go-To for Property Investors 🏠🧠

🧾🏢 DSCR Loans 101: What They Are and Why Investors Love Them

When it comes to scaling your real estate portfolio, few loan options are as powerful—and misunderstood—as the DSCR loan. If you’re an investor looking to qualify based on your property's income instead of your personal income, this might be the perfect tool for your next deal.

What is a DSCR Loan?

DSCR stands for Debt Service Coverage Ratio. This type of loan measures a property's ability to cover its own debt. Instead of relying on your W-2s, tax returns, or pay stubs, lenders focus on the income your investment property generates. That makes DSCR loans ideal for self-employed investors, gig workers, and anyone scaling their rental portfolio.

How Does DSCR Work?

Lenders use the formula:
DSCR = Net Operating Income / Annual Debt Service
For example, if your property earns $1,500/month in rent and your mortgage (including taxes and insurance) is $1,250/month, your DSCR would be 1.2. Most lenders look for a DSCR of 1.0 to 1.25.

Benefits for Real Estate Investors

·         ✅ No personal income verification

·         ✅ Streamlined underwriting process

·         ✅ Great for portfolio expansion

·         ✅ Works for short-term and long-term rentals

·         ✅ Flexible LLC or personal ownership structures

Common Requirements

·         Minimum DSCR of 1.0 (some go lower with higher rates)

·         20–25% down payment

·         Property must be income-producing

·         Decent credit score (660+ preferred)

Who Should Use a DSCR Loan?

This loan is perfect for:

·         Buy-and-hold investors

·         BRRRR strategy users

·         Airbnb/short-term rental investors

·         Self-employed landlords with multiple properties

📌 Pro Tip: Some lenders allow DSCR as low as 0.75 if you have strong reserves or put more money down. This flexibility can help you scoop up undervalued properties before they cash flow fully!

💬 Want to know if a DSCR loan is right for your next project? Let’s connect: https://billrapponline.com

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© 2023-2024 Bill Rapp, Medallion Funds LLC, Director of Capital Advisory