Are you buying an Investment Property?

Buying an investment property is an exciting step toward building long-term wealth, generating passive income, and growing your real estate portfolio. Whether you’re purchasing your first rental or adding another asset to your lineup, choosing the right financing is critical. Two of the most common routes are Conventional Investment Loans and DSCR (Debt Service Coverage Ratio) Loans. Here's what you need to know to make an informed decision.

Conventional loans are a traditional route for many real estate investors. They are underwritten based on your personal income, credit, and debt-to-income ratio.

Key Features:

• Requires a 15-25% down payment (depending on the number of units and occupancy type).
• Fixed or adjustable interest rates available.
• Typically requires two years of income documentation.
• Can be used for single-family homes, condos, or multi-unit properties (up to four units).

Conventional financing offers great long-term stability and lower interest rates, but it may not be the best fit if you have limited documented income or want to scale quickly.

DSCR (Debt Service Coverage Ratio) loans are designed specifically for real estate investors and are based on the cash flow of the property rather than your personal income.

What is DSCR?

The Debt Service Coverage Ratio measures how much cash flow a property generates versus its debt obligations. For example, a DSCR of 1.25 means the property generates 25% more income than is needed to cover the mortgage.

DSCR Formula:

Monthly Rental Income / Monthly PITIA (Principal, Interest, Taxes, Insurance, and HOA) = DSCR

Key Benefits of DSCR Loans:

• No income or employment verification required.
• Close in your LLC or Corporation name to protect personal assets and simplify accounting.
• Available to U.S. citizens, permanent residents, and foreign nationals.
• No limit to the number of financed properties.
• Ideal for investors looking to scale rapidly or those with high net worth but limited taxable income.

Typical Requirements:

• Minimum DSCR: .01 (pricing will be better the higher the DSCR).
• Credit Score: 660+ (varies by lender).
• 20-25% down payment.

One of the most powerful aspects of DSCR loans is that foreign nationals can qualify without U.S. residency or a social security number.

Foreign National Investor Perks:

• No U.S. credit required.
• Ability to close in an LLC or foreign entity.
• Great for global investors seeking U.S. real estate exposure.

Lenders may require:

• Passport and valid visa (if applicable).
• International credit or banking references.
• 30% down payment (varies based on lender and property).

Ask yourself:

• Are you looking for long-term, low-cost financing? → Conventional Loan
• Do you want to scale quickly or avoid income documentation? → DSCR Loan
• Are you investing through an LLC or as a foreign buyer? → DSCR Loan

The key is aligning your financing with your goals, whether it's building cash flow, protecting your assets, or creating an international portfolio.