DSCR Loans for First-Time Investors

How rent is set when nobody lives there yet

On a vacant purchase, the appraiser's market-rent analysis is the rent. It is usually conservative, which is the point. Your job before writing an offer is to know roughly what that number will be — comparable rentals in the same neighborhood, same bedroom count, same condition — and to run it against the payment in the calculator. A property that only works at an optimistic rent is a property that will not clear the ratio.

The cash side

• Down payment — larger than an owner-occupant's, set by the program.
• Reserves — months of the payment in liquid assets after closing, set by the program. This is where first deals most often stall.
• Closing costs, including the appraisal with its rent analysis, title, and any state transfer or recording taxes.
• A repair cushion the lender does not require and you should have anyway.

Common first-deal mistakes

• Qualifying the deal on the listing agent's "projected rent." The appraiser will not use it.
• Forgetting taxes reset at purchase in many states — the seller's tax bill is not your tax bill.
• Ignoring the HOA on a condo; dues are in the payment.
• Planning to live in it for a while. A DSCR loan is for non-owner-occupied property; an owner-occupied plan is a different loan.
• Not asking about the prepayment penalty before choosing a program.

Personal name or LLC on the first one?

Either works on most programs. Investors who intend to hold several properties often start in the LLC to avoid retitling later; the LLC page covers what changes. Ask your attorney about liability and your accountant about tax before deciding — a lender can tell you what is financeable, not what is wise.

Common questions