LONG TERM RENTAL/DSCR LOANS

Who Benefits from a Long-Term Rental/DSCR Loan and How Does It Work?

At SL Global, we understand the challenges real estate investors face when seeking financing for rental projects. Traditional lenders often base approval on personal income, which can be problematic for investors who claim tax deductions, reducing their net income on paper. That’s where DSCR (Debt Service Coverage Ratio) loans come in—designed specifically for investors to simplify the financing process and prioritize the cash flow of the property itself.

What Are DSCR Loans and Who Should Use Them?

DSCR loans are an excellent option for both new and experienced investors looking to purchase or expand their rental property portfolios. Unlike conventional loans, DSCR loans focus solely on the rental income generated by the property rather than the borrower’s personal income or employment history. This approach offers flexibility, faster approvals, and streamlined qualifications.

How Does a DSCR Loan Work?

The Debt Service Coverage Ratio measures a property’s ability to generate sufficient income to cover loan payments. It is calculated by dividing the total rental income by the debt service (monthly loan payments).

• A DSCR of 1.0 indicates the property earns just enough to cover loan payments, but most lenders prefer a DSCR of 1.25 or higher to account for additional expenses like repairs, maintenance, and other obligations.
• A higher DSCR makes investors more appealing to lenders, potentially qualifying them for larger loan amounts and better interest rates.
• Some lenders may allow exceptions for DSCRs below 1.0 with higher down payments, but this is rare.

Why Choose DSCR Loans?

The Debt Service Coverage Ratio measures a property’s ability to generate sufficient income to cover loan payments. It is calculated by dividing the total rental income by the debt service (monthly loan payments).

• Simplified Qualification: Focuses on property cash flow instead of personal income or employment history.
• Faster Approvals: Streamlined process means you can close quickly and focus on your investment.
• Portfolio Growth: Ideal for expanding your rental property holdings without the hurdles of conventional financing.

To apply, you’ll need to provide documentation such as a signed lease agreement showing current rental income or a property appraisal to verify its potential cash flow. At SL Global, we’re here to guide you through the process, helping you secure the financing you need to maximize your real estate investment opportunities.