DSCR or “Debt Service Coverage Ratio” is a super important metric by which real estate investors should be aware of, even when using hard money loans. Many hard money lenders are now using DSCR ratios as a criteria for loan approval. If the market rent for a property is equal to or greater than the total housing payment (principal, interest, tax, insurance, HOA dues, or “PITIA”, you are in good shape. A DSCR ratio of 1.00 is good. A DSCR ratio of less than 1.000 means that the market rent/current lease amount, is less than the total debt/expense payment for the property and you may have a hard time refinancing out of the hard money loan and you may have over leveraged the property.
Rezcap Funding ensure that our hard money borrowers have a way out even if they intend on flipping the property. A solid contingency plan is crucial for all investors.