A DSCR ratio under 1.0 does not have to end your deal. Most people walk the second the rent comes up a little short, because they figure the numbers are final. They are not. If the rent does not fully cover the payment, you still have moves. Going interest-only drops the monthly payment, which can push you right back over 1.0. Stretching the term to 40 years instead of 30 does basically the same thing. And the one I keep reaching for right now is asset depletion.
Here is how asset depletion works. We take your liquid assets, divide by 60 months, and count that as extra income. So $100K sitting in the bank turns into qualifying income, and on a borderline deal that is often enough to drag it across the line. I will be straight with you, none of this is magic. If a deal is way underwater the math still won’t work. But when you are close and just need a little help getting over 1.0, these are the workarounds. The catch is that most lenders will not bother telling you any of them exist. After funding over $50M in investor deals, I can tell you the difference is usually the lender, not the borrower.
If a property is coming up short on DSCR, send it my way before you kill it. There is a good chance one of these programs bridges the gap. No pressure, just want to see if it works. Grab a quick call here:
By the way, I was recently featured on How Investors Scale Beyond Conventional Mortgages (DSCR Loans Explained) podcast where we broke down how DSCR loans differ from conventional mortgages, how HELOCs can fund investment property down payments, and the financial fundamentals needed to start investing in real estate. You can watch the full episode here:
Hope that helps.
Ben Stef, Mortgage Advisor | NMLS# 2018674
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