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in Arcadia, CA
Arcadia's rental market attracts serious investors, but choosing between DSCR and hard money loans confuses even experienced buyers. Both skip personal income verification, yet they serve completely different investment strategies.
DSCR loans work for buy-and-hold investors who want long-term financing on cash-flowing properties. Hard money fits fix-and-flip projects or short-term bridge financing where speed matters more than cost.
DSCR loans qualify you based on rental income divided by mortgage payment. If the property generates $4,000 monthly and the payment is $3,200, your ratio is 1.25 — that's enough for most lenders.
Terms run 30 years at rates typically 1-2% above conventional mortgages. You'll need 20-25% down and a 620+ credit score. These loans close in 3-4 weeks, which works fine for standard purchases but not for competitive bidding wars.
Hard money loans use the property's current or after-repair value as collateral, ignoring your income entirely. Lenders fund based on the deal's profitability, not your tax returns or rent rolls.
Expect 8-15% interest rates on 6-24 month terms with 2-4 points upfront. Most hard money lenders fund 65-75% of purchase price or after-repair value. Closings happen in 7-14 days, which wins deals that need fast cash.
Cost structure separates these loans dramatically. DSCR rates run 7-9% with standard closing costs. Hard money costs 8-15% plus 2-4 points, meaning a $500K loan costs $10-20K just to close.
Timeline and strategy matter more than rate. DSCR works when you're buying a turnkey rental and holding it. Hard money makes sense when you're renovating a property in 6 months and either selling or refinancing into permanent financing.
Choose DSCR if you're buying a rental property that's already habitable and generates market-rate rent. The lower rate and 30-year term build long-term wealth. You need the property to cover its own debt service from day one.
Pick hard money when speed or condition blocks traditional financing. Properties needing major renovation, auction purchases, or deals requiring 10-day closes fit hard money perfectly. Plan your exit before you close — refinance or sell within 12-18 months to avoid bleeding cash on interest.
Not effectively. DSCR lenders require the property to generate rental income immediately. Properties needing renovation won't qualify until they're rent-ready.
Most fund 100% of purchase plus 75-90% of renovation budget based on after-repair value. You'll need cash reserves for the unfunded portion and carrying costs.
Hard money cares less about credit scores, focusing on deal profitability and exit strategy. DSCR loans typically require 620+ credit and cleaner financial history.
Absolutely. Most investors use hard money to buy and renovate, then refinance into DSCR once the property is rent-ready and stabilized with tenants.
Yes. DSCR loans fund 1-4 units and some small apartment buildings. Hard money works on any property type including larger commercial projects.