At Coast2Coast Mortgage, we understand that real estate investment is one of the most powerful ways to build wealth and generate passive income. That's why we offer specialized financing solutions for investment properties, including our Investor Cash Flow DSCR loans, designed specifically for real estate investors looking to expand their portfolio.
What Are DSCR Loans?
DSCR (Debt Service Coverage Ratio) loans offer a streamlined approach to financing investment properties by focusing on the property's income potential rather than your personal income. This innovative financing solution allows you to qualify based on the property's ability to generate rental income, not your tax returns or personal financial situation.
Simplified Investment Property Financing
Traditional investment property loans often require extensive documentation of personal income, tax returns, and employment history. DSCR loans simplify this process by primarily evaluating the property's income potential relative to its expenses. This makes them particularly attractive for self-employed investors, those with complex tax situations, or investors looking to scale their portfolio quickly.
Key Benefits of Investment Property Loans
No Tax Returns Required
Qualify based on property income potential rather than personal tax returns. This is especially beneficial for self-employed investors or those who utilize tax strategies that might otherwise limit their borrowing capacity with conventional loans.
Multiple Properties
No limit on the number of financed properties in your portfolio. Unlike some conventional financing options that cap the number of mortgaged properties you can have, DSCR loans allow you to continue expanding your real estate portfolio without artificial limitations.
Business Entity Friendly
Close loans in LLC or other business entities for better protection. This provides valuable liability protection and can offer tax advantages compared to holding properties in your personal name.
Guidelines For Investment Property Loans
DSCR Ratio
Minimum 1.0 DSCR, lower ratios considered with compensation. The DSCR is calculated by dividing the property's annual rental income by its annual debt obligations (mortgage payment, taxes, insurance, and association fees). A ratio of 1.0 means the property generates just enough income to cover its expenses.
Credit Score
Minimum 620 credit score required for most programs. While this is the minimum, higher credit scores typically result in better interest rates and loan terms.
Down Payment
20-25% down payment typically required. This is higher than primary residence loans but standard for investment properties due to the increased risk associated with rental properties.
Property Type
Investment properties only, various types eligible. This includes single-family homes, multi-family properties (2-4 units), condominiums, townhouses, and in some cases, short-term rental properties like Airbnb or VRBO.
Why Choose Investment Property Financing?
Investment property loans, particularly DSCR loans, offer several advantages for real estate investors:
- Simplified qualification process focused on the property, not your personal finances
- Ability to scale your portfolio without being limited by your personal income
- Flexibility to purchase properties through business entities for better protection
- No limit on the number of financed properties you can have
- Potential for higher returns through leveraging investment capital
Whether you're purchasing your first investment property or adding to an established portfolio, our investment property loan options can help you achieve your real estate investment goals.
Ready to Expand Your Real Estate Portfolio?
Jim Steen at Coast2Coast Mortgage can help you navigate the investment property financing process and find the best solution for your investment strategy.
Frequently Asked Questions About Investment Property Loans
What is the Debt Service Coverage Ratio (DSCR)?
The DSCR is calculated by dividing the property's annual rental income by its annual debt obligations (mortgage payment, taxes, insurance, and association fees). A ratio of 1.0 means the property generates just enough income to cover its expenses. Lenders typically prefer a DSCR of 1.25 or higher, indicating the property generates 25% more income than needed to cover expenses.
Can I use short-term rental income (Airbnb, VRBO) to qualify?
Yes, many DSCR loan programs allow for short-term rental income to be used for qualification. The income is typically calculated based on market rents or documented short-term rental history, depending on the lender's guidelines.
Are interest rates higher for investment property loans?
Yes, interest rates for investment property loans are typically 0.5% to 1.5% higher than rates for primary residences. This reflects the increased risk associated with investment properties, as borrowers are more likely to prioritize their primary residence in financial hardship situations.
Can I refinance my existing investment properties with a DSCR loan?
Yes, DSCR loans can be used for both purchases and refinances. Refinancing with a DSCR loan can be particularly beneficial if you've improved the property's rental income since your initial purchase or if you want to tap into equity for additional investments.