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in Chico, CA
Chico investors have two powerful financing options for rental properties and fix-and-flip projects. DSCR loans qualify you based on rental income, while hard money loans focus on the property's value and your exit strategy.
Both loan types skip traditional income verification, making them ideal for self-employed investors or those with complex tax returns. Understanding which option fits your Chico investment strategy saves time and money.
DSCR loans evaluate your Chico rental property's ability to cover its own mortgage payment. Lenders calculate the debt service coverage ratio by dividing monthly rental income by the monthly mortgage payment.
A DSCR of 1.0 or higher means the rent covers the mortgage. These loans typically offer 30-year terms with rates similar to conventional mortgages, making them perfect for buy-and-hold investors.
You can close in 2-3 weeks and finance properties from single-family homes to small multifamily buildings. No tax returns or W-2s required—just proof the property generates sufficient rental income.
Hard money loans focus on your Chico property's after-repair value and equity position. Lenders typically loan 65-75% of the property's value, with less concern about your credit score or income documentation.
These short-term loans usually last 6-24 months with interest-only payments. They're designed for investors who need fast funding to purchase distressed properties, complete renovations, and either sell or refinance quickly.
Expect higher interest rates and points compared to DSCR loans, but gain the ability to close in days rather than weeks. Hard money excels when speed and flexibility matter more than cost.
DSCR loans offer longer terms and lower rates, while hard money provides speed and flexibility. A DSCR loan costs less over time but requires the property to already generate rental income or be rent-ready.
Hard money loans charge higher rates and origination fees but close quickly enough to compete with cash buyers in Chico's market. You'll pay 8-12% interest plus 2-4 points versus DSCR rates that track closer to conventional loans.
DSCR loans require standard appraisals and title work. Hard money lenders move faster with simplified processes but expect you to have a clear exit strategy—either a quick sale or refinance into permanent financing.
Choose DSCR loans for Chico rental properties you plan to hold for years. If you're buying a property that's already rented or rent-ready, DSCR financing provides affordable long-term leverage without income documentation.
Select hard money when you need to act fast on a Chico fixer-upper or foreclosure. The speed lets you compete with all-cash investors, and you can refinance into a DSCR loan once renovations are complete and the property is rented.
Many successful Chico investors use both strategies. They acquire distressed properties with hard money, complete renovations, find tenants, then refinance into lower-cost DSCR loans for permanent financing.
DSCR loans require rental income, making them unsuitable for flips. Use hard money for renovation projects, then consider DSCR if you decide to keep the property as a rental instead of selling.
Hard money loans typically close in 5-10 days, while DSCR loans take 2-3 weeks. The speed difference matters when competing for properties in competitive Chico neighborhoods.
Neither requires prior landlord experience. DSCR lenders focus on the property's rental income potential, while hard money lenders care about property value and your exit plan.
DSCR loans typically require 20-25% down for investment properties. Hard money lenders usually want 25-35% down or equity, depending on the property's condition and your experience.
Yes, this is a common strategy. Complete your renovations with hard money, secure a tenant, then refinance into a DSCR loan for lower long-term financing costs.