Texas DSCR Long-Term Rental Lenders

RCN Capital, a national direct private lender, funded a $136,000 DSCR loan for the purchase of a single-family residence in Texas City, Texas. The experienced Borrower was under contract to acquire the subject property for $170,000 with intentions of holding it long-term as a rental/income property. The subject property was appraised for $230,000 as-is and the Collateral Desktop Analysis (CDA) Report confirmed that the value was acceptable, so the real LTV at the time was around 59%. The appraiser estimated the market rent to be $1,850/month which results in a 1.42 DSCR (debt service coverage ratio). RCN Capital funded 80% of the purchase in 1st lien position and the Borrower contributed 20% cash. The Borrower had excellent credit with mid-scores of 788 and bank statements showed evidence of sufficient assets to justify the loan. The fixed interest rate was 6.5% and the loan term was set at 30 years. We charged 3% origination points. The subject property is approximately 1,880 square feet on a 5,280 square foot lot. This DSCR rental purchase loan was funded in October 2022.

The Opportunity

In the rising interest rate environment of 2022, many single-family rental investors looked for certainty. This Texas investor wanted to get cash out of the equity of his rental portfolio in Fort Worth, Dallas, and Burleson, Texas, but also wanted to lock in 2022’s rates for the long term. So he set out on a search for a fixed-rate, fully-amortizing 30-year loan as a cash-out refinance.

The Solution

The investor chose to partner with Lima One Capital in order to capitilize on the opportunity to lock in a fixed-rate over a full 30-year term. Most private lenders do not offer investors this kind of long-term interest rate security on cash-out refinances. Lima One’s team worked with the investor to optimize the portfolio makeup and maximize leverage, using the right mix of properties with qualifying debt-service coverage ratios to secure 75% on the cash-out refinance. Lima One’s in-house servicing team worked efficient and dynamic in ensuring the investor ended up with a loan that allowed him to continue to scale his portfolio and build his real estate empire.

The subject property was in excellent condition and tenant-occupied at closing. The Borrower plans to continue leasing the property at the market and eventually refinance as an exit strategy. The loan term was set at 30 years. This rental portfolio refinance loan was funded in January 2022.