When it comes to investing in real estate in Southern California, the earlier you can start building your portfolio, the better. Time is your most powerful tool in investing, but it might feel like time is not on your side as you consider when you’ll be able to secure financing for your next real estate property.
Whether you’re an experienced investor or you are preparing to buy your first investment property, consider how a cash flow investor loan might allow you to reach your goals in real estate more quickly.
What is a cash flow mortgage?
A cash flow mortgage (also sometimes called a DSCR loan, which stands for Debt Service Coverage Ratio) is a type of loan designed specifically for investment properties. Unlike traditional mortgages that rely heavily on your personal income to determine eligibility, cash flow mortgages focus on the income the property itself is expected to generate.
Our underwriters use the property’s projected (or actual if it’s already occupied by tenants) rental income to determine your eligibility. If the property pays for itself (or more), you’re almost certain to qualify without ever having to show your personal income as a point of qualification.
Let’s say you find a turnkey duplex in your ideal market. It’s listed at a fair price, and the projected rents cover the mortgage with a solid margin. With a traditional loan, you might hit a snag because your personal DTI ratio is already stretched from other investments. But with a cash flow mortgage, we will look at the rent roll, not your salary and DTI.
As long as the rental income covers the mortgage and expenses, you’re likely good to go. And now you can add a cash-flowing asset to your portfolio without waiting until you can qualify the traditional way.
How does a cash flow mortgage make it easier to invest in real estate?
There are a few ways this type of mortgage can benefit you as you pursue your investment goals.
Faster Access to Opportunities
When you’re not tied to strict personal income requirements or jumping through hoops for employment verification, you can move faster. You’ll be able to move faster and potentially beat out competition for the best investment properties because your loan approval process is so much more streamlined.
Speed can give you a serious edge against other buyers.
More Easily Scale Your Portfolio
With traditional mortgages, you’ll have to wait quite a bit of time between investments. Scaling your portfolio can take many years this way. A cash flow mortgage frees you up to invest more quickly. Because we base approval on the property’s ability to cover its own debt, you’re not limited by your personal debt-to-income ratio. That means you can finance multiple properties more easily, building a diversified portfolio in less time. Because you’re leveraging the property’s cash flow, not your own, you’ll be far more free to pursue your goals quickly.
Flexibility
We pride ourselves on being so find flexible and creative solutions that work for our clients. Interest-only periods, fixed or adjustable rates, and not requiring personal documentation are just some of the options that can help. This flexibility makes it easier to manage monthly expenses and maintain strong cash flow as your portfolio grows.
A cash flow mortgage is a strategic tool for growing your real estate investments at a faster pace. By focusing on what the property can earn, rather than what you personally make, you can open the door to more deals.
If you have more questions about securing financing for your investment or you’d like to apply for a loan, we can help. Contact us any time to find out how we’ve become a trusted resource for many investors.