Loading
in Paradise, CA
Paradise investors rebuilding and expanding their rental portfolios face a choice between two powerful financing tools. DSCR loans and hard money loans both serve real estate investors, but they work in fundamentally different ways.
Understanding which loan type fits your investment strategy can save you thousands and speed up your timeline. These options let you fund properties without traditional income verification, making them popular among serious investors in Butte County.
DSCR loans qualify you based on your rental property's income, not your personal tax returns. The property must generate enough rent to cover the mortgage payment, typically with a ratio of 1.0 or higher.
These loans offer longer terms similar to conventional mortgages, usually 30 years with fixed or adjustable rates. They work well for Paradise investors buying stabilized rental properties or properties that will generate immediate rental income.
Rates vary by borrower profile and market conditions, but DSCR loans typically cost less than hard money over time. You can finance single-family homes, multi-family properties, and even some commercial real estate with DSCR products.
Hard money loans focus on the property's current or after-repair value rather than rental income potential. Lenders primarily care about the asset's value and your equity position, not credit scores or income documentation.
These loans close fast, often within days or weeks, making them ideal for competitive Paradise properties or time-sensitive opportunities. Terms run short, typically 6 to 24 months, with higher interest rates reflecting the speed and flexibility.
Rates vary by borrower profile and market conditions, but expect significantly higher costs than traditional financing. Hard money excels for fix-and-flip projects, major renovations, or bridge financing when you need capital immediately.
Timeline separates these products more than anything else. Hard money closes in days while DSCR loans take weeks, similar to conventional mortgages. Hard money funds short-term strategies while DSCR loans support long-term rental portfolios.
Cost structures differ dramatically between the two. DSCR loans charge lower interest rates but require the property to generate steady rental income. Hard money loans cost more but don't require current income, making them perfect for properties needing work.
Your exit strategy determines the right choice. Plan to hold and rent a Paradise property for years? DSCR loans make sense. Need to renovate and sell quickly? Hard money provides the speed you need without income requirements.
Choose DSCR loans when buying rental properties that already generate income or will immediately after purchase. These loans reward Paradise investors building long-term wealth through steady rental cash flow with lower rates and predictable payments.
Select hard money when speed matters or when the property needs significant work before it can generate income. Fix-and-flip investors, wholesalers, and anyone needing bridge financing benefit from hard money's fast closes and flexible terms.
Many successful Paradise investors use both products at different times. Hard money might fund your initial purchase and renovation, then you refinance into a DSCR loan once the property is rent-ready and stabilized.
DSCR loans require the property to generate rental income immediately, so extensive repairs that prevent renting won't work. Hard money loans better suit properties needing significant renovation before they're rent-ready.
DSCR loans typically require 20-25% down for investment properties. Hard money lenders often want 25-35% down or equity, though rates vary by borrower profile and market conditions.
Hard money loans can close in 5-10 business days when needed. DSCR loans typically take 3-4 weeks, similar to conventional mortgages but faster than traditional investment property loans.
DSCR loans usually require credit scores of 620 or higher. Hard money lenders care less about credit, focusing instead on the property's value and your equity position.
Yes, this strategy works well for Paradise investors. Use hard money to acquire and renovate, then refinance into a DSCR loan once the property generates stable rental income.