DSCR Loan Tennessee
- LTV: 75%
- Term: 30 Year
- Rate: 7.85%
- Points: 2.0%
What are DSCR Loans used for in Tennessee?
What are dscr loans used for in Tennessee?
DSCR loans are a powerful financing tool for real estate investors in Tennessee, allowing them to qualify for loans based on the rental income potential of the property rather than personal income.
These loans use the Debt Service Coverage Ratio (DSCR)—a calculation comparing rental income to property expenses to determine eligibility and loan amounts.
In Tennessee, where rental demand is strong, DSCR loans are commonly used to finance long-term rental properties, short-term vacation rentals, and multi-unit buildings.
For those following the BRRRR investing strategy, DSCR loans are ideal for refinancing after stabilizing a property. This strategy allows investors to build a portfolio of rental properties while preserving capital for future projects.
If you're considering investing in Airbnb rentals, DSCR loans can also help finance short-term rentals in Tennessee’s high-demand vacation markets. Learn more in our guide: Financing Airbnb Rentals with DSCR Loans.
To understand how to calculate DSCR and determine your eligibility, visit the How to Calculate DSCR section of this page.
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DSCR loans are a powerful financing tool for real estate investors in Tennessee, allowing them to qualify for loans based on the rental income potential of the property rather than personal income.
These loans use the Debt Service Coverage Ratio (DSCR)—a calculation comparing rental income to property expenses to determine eligibility and loan amounts.
In Tennessee, where rental demand is strong, DSCR loans are commonly used to finance long-term rental properties, short-term vacation rentals, and multi-unit buildings.
For those following the BRRRR investing strategy, DSCR loans are ideal for refinancing after stabilizing a property. This strategy allows investors to build a portfolio of rental properties while preserving capital for future projects.
If you're considering investing in Airbnb rentals, DSCR loans can also help finance short-term rentals in Tennessee’s high-demand vacation markets. Learn more in our guide: Financing Airbnb Rentals with DSCR Loans.
To understand how to calculate DSCR and determine your eligibility, visit the How to Calculate DSCR section of this page.
Tennessee DSCR Loan Products
Low Rates, from 1.0% Origination for long term & short term rentals in Tennessee.
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Long Term Rental
DCSR Loans Tennessee
Rates from 6.75%
LTV Up To 80%
From 1.0% Origination Points
Minimum DSCR: 1.0
Closing Time 14 Days
Appraisal Required
Minimum Credit Score: 660
Property Condition C4 Required
Purchase, Refinance, and Cash Out Available
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Short Term Rental
DCSR Loans Tennessee
Rates from 6.95%
LTV Up To 80%
1-2% Origination Points
Minimum DSCR: 1.0
Closing Time 21 Days
Appraisal Required & AirDNA Check
Minimum Credit Score: 680
Property Condition C4 Required
Purchase, Refinance, Cash Out Available
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How To Determine DSCR For Tennessee Rental Properties?
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 Tennessee, 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.
(DSCR Evaluation)
Property Value: $474,000
Loan: $379,200
Interest Rate: 7.25%
Ammortization: 30 YR (FRM)
Monthly Rent: $3,995
P&I Payment: $2,586.81
Monthly Taxes: $400.00
Monthly Insurance: $180
Monthly HOA: $0
DSCR 1.26
Tennessee DScr Loan process
Ridge Street closes Tennessee DSCR loans in 14-21 days.
Apply Or Get Pre-Approved Online
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Receive your term sheet
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Submit Docs
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Appraisal or BPO
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Closing
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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 BRRRR 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
Best Rental Markets In Tennessee For DSCR Loans
Tennessee offers a variety of rental property opportunities, with strong potential for both short-term and long-term investments. Nashville and Gatlinburg are top choices for short-term rentals, driven by tourism and major attractions. Memphis and Knoxville provide excellent BRRRR opportunities, with affordable home prices and growing rental demand. The state’s growing economy also makes it attractive for multifamily investments, especially in cities with expanding job markets. DSCR loans are ideal for funding these investments, allowing investors to tap into Tennessee’s diverse and lucrative rental market for both cash flow and long-term growth.
NashVille
Nashville’s rental market is a hotspot for Airbnb investments, driven by its booming tourism industry, vibrant music scene, and major events like the CMA Awards and Nashville Film Festival. Neighborhoods such as Downtown, East Nashville, and The Gulch are in high demand for short-term rentals, offering investors strong potential for high returns. With a steady influx of visitors year-round, Airbnb properties can generate significant cash flow. DSCR loans are an excellent option for financing Airbnb investments, allowing investors to leverage rental income to qualify for funding and grow their portfolios in this lucrative market.
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memphis
Memphis offers a unique opportunity for rental property investors, thanks to its low cost of housing and strong demand for rentals. The city’s affordable home prices create excellent conditions for the BRRRR (Buy, Rehab, Rent, Refinance) strategy, especially in emerging neighborhoods with growth potential. However, it’s important to avoid the cheapest areas with high crime rates, as they may not offer the long-term stability or rental income potential needed for a successful investment. By using DSCR loans, investors can finance properties with cash flow potential, making Memphis a promising market for building a profitable rental portfolio.
Gatlinburg
Gatlinburg offers a prime market for short-term rental investments, driven by its status as a major tourist destination with attractions like the Great Smoky Mountains National Park. The city sees strong demand for vacation rentals year-round, particularly in areas close to the park and downtown. With relatively high nightly rates and consistent visitor traffic, Gatlinburg presents an excellent opportunity for Airbnb investors looking to generate strong cash flow. Investors can leverage DSCR loans to finance short-term rental properties, using rental income to qualify for loans and scale their portfolios in this highly desirable market.
Pennsylvania DSCR Loan FAQ’s
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.
What loan amounts can I get for a DSCR loan?
Between $50K and $2M. 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.
For refinances and cash outs, does the property have to be rented?
The short answer is no. We understand that investors who fix and refinance properties intend to refinance as soon as possible after renovating a property.
This said, providing a DSCR loan on a rental property that is not rented is higher risk. We'll want to see that the market you are in is very "rentable" at the market rent for your property. We will not provide a DSCR loan on a rental property that has been listed for rent for 3 months with no bites, for example.
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How to Get A DSCR Loan In Tennessee with Ridge Street?
Ridge Street is the #1 DSCR Rental Property Lender in Tennessee. We pride ourselves on fast closings and fairly priced loans. Get approved for your next project today.
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