Understanding DSCR Loans in Florida
What are DSCR Loans used for in Florida?
What are DSCR Loans used for in Florida?
Real Estate Investors in Florida use DSCR loans to leverage investment property income to secure financing.
This Debt Service Coverage Ratio (DSCR) loan determines the loan amount by calculating the ratio of rental income to the cost to own and operate the property.
In Florida, there are many opportunities to acquire cash flowing properties with DSCR ratios greater than 1.
To learn more about how to find cash flowing properties that qualify for a DSCR loan in Florida read this article: “Financing Airbnb Rentals With DSCR Loans”.
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Real Estate Investors in Florida use DSCR loans to leverage investment property income to secure financing.
This Debt Service Coverage Ratio (DSCR) loan bases the loan amount on the ratio of rental income to the cost to own and operate the property.
In Florida, there are many opportunities to acquire cash flowing properties with DSCR ratios greater than 1.
To learn more about how to find cash flowing properties that qualify for DSCR loan in Florida read this article: “How to find DSCR Rental Properties in Florida”.
How To Determine DSCR?
The Debt Service Coverage Ratio (DSCR) is calculated by dividing the monthly rent of the property by the monthly loan payment (principal + Interest), taxes, insurance and association fees (PITIA).
DSCR = Rent/PITIA
The basis of a DSCR loan in Florida, is that the rent you collect from tenants leasing the property should be greater than the cost to own and operate the property.
Investment purpose rental properties with a DSCR greater than 1.0 are called “cash flowing”.
You can calculate the DSCR of your rental property with our DSCR Loan Calculator.
Property Value: $350,000
Loan: $280,000
Interest Rate: 7.25%
Ammortization: 30 YR (FRM)
Monthly Rent: $3,000
P&I Payment: $1,910.09
Monthly Taxes: $205
Monthly HOA: $0
Monthly Insurance: $150
DSCR 1.32
When To Use a DSCR Loan?
DSCR loans are used by investors to "hold" real estate. These loans are long term and amortizing. This allows investors to continuously gain equity in their property while generating monthly cashflow.
Investors either use DSCR loans when purchasing a property or when refinancing it. The BRRR Investing Strategy is popular among investors in which the DSCR loan is used to "cash out" the property.
Benefits Of DSCR LoanS Compared To Other Loan Types
Other benefits of DSCR loans include:
- No income verification
- Can be used for long term and short term rentals (Financing Airbnb's for example)
- Cost Effective
How to Get A DSCR Loan In Florida with Ridge Street?
Ridge Street is the #1 DSCR Rental Property Lender in Florida. We pride ourselves on fast closings and fairly priced loans. How can we help?
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The best cities to invest in real estate in Florida.
Florida is one of the best markets in the US to invest in Real Estate. Of the US states in 2023, Florida had the 5th fast growing economy in the US. This growth is a reflection of the the tax friendly laws within the State of Florida which has made it a hub for entrepreneurs and high paying jobs. This growth is also supported by an extremely low unemployment rate of 3.2% in 2023. Real Estate valuations and rents are highly linked to growth and employment rates in urban centers in Florida.
Orlando
Orlando, FL, presents a compelling case for real estate investment driven by substantive metrics. Its status as the theme park capital of the world ensures a robust tourism sector, with over 75 million annual visitors generating consistent demand for lodging and rental properties. The city's economic diversity, spanning technology, healthcare, and aviation, fosters resilience and opportunities for investment across various sectors. Investors can capitalize on Orlando's dynamic market landscape for long-term success with rental and fix-and-flip real estate strategies.
Tampa
Tampa shines as a top-tier real estate investment hub, boasting a stable economy fueled by major companies like Johnson and Johnson and Amgen. With a wide range of property options, from affordable investments to luxury residences, Tampa caters to diverse investor preferences. The city's downtown redevelopment projects, such as Water Street Tampa and the University of South Florida's College of Medicine, offer unique investment opportunities. Combined with consistent property appreciation and landlord-friendly regulations, Tampa stands out as an ideal destination for property investors seeking long-term growth and stability.
Miami
Miami's real estate market is on fire, with property values soaring and demand reaching new heights in 2024. Fueled by a strong economy, steady mortgage rates, and global interest, Miami has become a hotbed for real estate investment this year. Despite rising prices, savvy investors can still find hidden opportunities, especially in up-and-coming neighborhoods and renovation projects. With its vibrant lifestyle, multicultural appeal, and booming rental market, Miami remains a top destination for real estate investment, offering both luxury and value to buyers and sellers alike.
Jacksonville
Tampa shines as a top-tier real estate investment hub, boasting a stable economy fueled by major companies like Johnson and Johnson and Amgen. With a wide range of property options, from affordable investments to luxury residences, Tampa caters to diverse investor preferences. The city's downtown redevelopment projects, such as Water Street Tampa and the University of South Florida's College of Medicine, offer unique investment opportunities. Combined with consistent property appreciation and landlord-friendly regulations, Tampa stands out as an ideal destination for property investors seeking long-term growth and stability.
Frequently Asked Questions
How can I Improve the DSCR of my property?
- Increase Your Down Payment. By Increasing your down payment your loan amount will go down and your DSCR will increase. If you’re struggling to improve your DSCR past 1.0, increasing your down payment is an option you may have to consider.
- Ask Your Lender About A Rate Buy Down. Some lenders, including Ridge Street, allow you to pay an additional fee at closing in exchange for a lower rate. In some cases, a rate buydown will allow you lower your DSCR without increasing your overall cash required to close.
- Push For Less Expensive Insurance. Ask your insurance broker if there is anything they can do to lower your policy fee. A lower insurance policy fee will increase your DSCR.
Could I use a DSCR loan if I have to renovate a property?
You can start by getting a short term fix and flip loan to renovate the property and then refinance the property with a DSCR loan. The strategy of buy, rehab, rent, refinance, and repeating is called The BRRRR Strategy.
Can I use a DSCR loan on a Vacation property?
Absolutely! This is one of the main use cases for a DSCR loan. You can read more about financing your vacation property with a DSCR loan here.
What loan amounts can I get for a DSCR loan?
Between $50K and $3M. As long as a the DSCR is greater than 1.0, Ridge Street will lend on it.
Are DSCR loans only for investment properties?
Yes. If you are buying a piece of real estate which you intend to live in, then you would not qualify for a DSCR loan.
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