Investment Financing Is Not One Product
Real estate investors pursue very different strategies.
A borrower purchasing a stabilized single-family rental has different financing requirements from an investor acquiring a distressed property for renovation or purchasing a larger commercial asset.
Available options can include conventional investor loans, DSCR financing, Non-QM programs, fix-and-flip loans, portfolio financing and commercial mortgages.
We begin with the investment objective and then identify the financing structure that fits it.
Conventional Investment Property Financing
Traditional conventional financing can provide attractive terms for qualifying borrowers.
Qualification generally considers personal income, liabilities, credit, assets and applicable treatment of rental income.
For investors who fit agency guidelines, conventional financing can be an excellent long-term solution. Larger portfolios, complex income or other circumstances, however, may make alternative investor financing more practical.
DSCR Financing
DSCR programs generally focus on the relationship between qualifying rental income and the property's applicable debt or housing obligation.
This can allow an investor to qualify without relying primarily on traditional employment-income calculations.
DSCR financing can be particularly useful for borrowers with multiple properties, substantial business activity or tax returns that do not efficiently demonstrate personal qualifying income.
Financing Acquisition, Improvement and Exit
Financing should also reflect what will happen to the property.
A property purchased for renovation and resale may require short-term acquisition and rehabilitation financing.
An investor planning to renovate and retain the property may use short-term financing initially and later refinance into permanent rental financing after stabilization.
Understanding the exit strategy before acquisition can prevent the investor from selecting financing that becomes unnecessarily expensive or restrictive later.
Portfolio Growth and Access to Equity
Existing investment properties can also become sources of capital for future acquisitions.
Depending on equity, cash flow and qualification, investors may consider cash-out refinancing or other structures to redeploy capital.
The objective should be to balance leverage, liquidity, monthly cash flow and risk rather than simply borrowing the maximum amount available.