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Investor Cash Flow Loans (DCLR)

Investor Cash Flow Loans (DCLR)/ Debt Service Coverage Ratio loans are loans designed for real estate investors that do not want to use their tax returns to qualify to buy investment property.

The debt service coverage ratio is the property’s annual net operating income (NOI) compared to its annual mortgage debt service (annual debt obligation for the property). The Investor Cash Flow Loans (DCLR) is typically used by lenders to qualify a borrower for a real estate investment loan because it determines the borrower’s ability to repay the loan, also known as the income coverage.

Real estate investors often write off a lot of expenses on their rental properties, and therefore a DSCR loan is more appropriate and easier to qualify for. Other benefits include no limit on the number of financed properties unlike Fannie Mae and Freddie Mac (Bankable loans). You can also close these loans in a commercial entity such as an LLC.

The Fundamentals of DSCR

From a lender’s point of view, DSCR refers to the borrower’s ability to pay back a loan based on the monthly rent of the property. Essentially, it is a way to measure cash flow. The tricky thing about DSCR is that each lender may calculate it differently, and the minimum requirements often vary.

Why DSCR is good?

While it varies between lenders, typically anything above 1.2 is usually considered good, and anything above 1.5 is considered great. 1.0 means the investor is getting exactly the same amount of rent as their monthly payments. We calculate DSCR by dividing PITIA (monthly principal, interest, taxes, insurance and association dues) by the gross monthly rent.

  1. Here are some of the benefits:
  2. No income or job history required
  3. No personal income used to qualify
  4. No Limited on investment properties (owned or financed)
  5. Low debt service coverage ratio qualification
  6. Loan amount up to $5 mm
  7. Unlimited cash out
  8. Non Warrantable Condo- Investment
  9. Interest Only Loan Options
  10. 620 Minimum credit score
  11. First Investor Program

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