Being that DSCR loans are based on cash flow, it’s important to factor this into your process. Cash flow is determined by the DSCR ratio of the property. Often times, DSCR lenders require a DSCR ratio of 1.1 – 1.2. What this means is the rent needs to be 10-20% above the overall mortgage. Let’s dive into the math:
Assume rates are currently averaging 5%. Go on Google and use the mortgage calculator. Calculate the loan amount you’re seeking at the 5% + taxes & insurance. Whatever the monthly payment totals, you need to rent the property for 10-20% more.
Here’s a scenario:
$200k (loan size) @ 5% = $1,074 + $200/month for taxes + $100/month for insurance = $1,374. ($1,374 x 1.20 = $1,648 rent needed)
If this confuses you, email me and I’ll run the numbers to see if your property qualifies: email@example.com