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in Beaumont, CA
Beaumont investors have two powerful financing options for rental properties and fix-and-flip projects. DSCR loans and hard money loans each serve different investment strategies and timelines.
Both are non-QM loans that don't require traditional employment verification. Your choice depends on your project type, timeline, and financial goals in Riverside County's growing market.
Understanding the key differences helps you match the right loan to your investment plan. Each option has distinct advantages for specific real estate scenarios.
DSCR loans qualify investors based on a rental property's income rather than personal income. The property's cash flow determines loan approval, not your W-2 or tax returns.
These loans work well for buy-and-hold investors in Beaumont seeking long-term rental income. They offer 30-year terms with competitive rates for income-producing properties.
Lenders calculate the debt service coverage ratio by dividing rental income by the mortgage payment. A ratio above 1.0 means the property generates enough income to cover its debt.
Hard money loans are asset-based short-term loans primarily used for property acquisition and renovation projects. These loans focus on the property's value rather than borrower income or credit.
Investors use hard money for fix-and-flip projects, quick closings, and properties needing significant repairs. Loan terms typically range from 6 to 24 months in Beaumont.
Speed is the main advantage, with approvals often in days rather than weeks. This makes hard money ideal when timing matters for competitive Riverside County properties.
The biggest difference is loan term and purpose. DSCR loans offer 30-year financing for rental income, while hard money provides 6-24 month funding for renovations.
DSCR loans require the property to generate rental income for qualification. Hard money loans don't require income but focus on the property's after-repair value and equity position.
Interest rates and costs differ significantly. Hard money loans typically carry higher rates due to short terms and speed. DSCR loans offer more competitive long-term rates. Rates vary by borrower profile and market conditions.
Down payment requirements also vary between these options. DSCR loans may require 20-25% down for rental properties, while hard money often needs 25-35% due to higher risk profiles.
Choose DSCR loans if you're buying a rental property to hold long-term in Beaumont. This option works best when the property already generates or will quickly generate rental income.
Hard money makes sense for fix-and-flip projects or when you need lightning-fast closings. It's ideal for properties requiring renovation before they can generate rental income or be sold.
Consider your exit strategy before choosing. If you plan to refinance into permanent financing after repairs, hard money bridges that gap. If you want immediate long-term financing, DSCR is your answer.
Many Riverside County investors use both loan types for different projects. Your investment portfolio can include DSCR-financed rentals and hard-money-funded flips simultaneously.
DSCR loans aren't ideal for flips since they require rental income for qualification. They're designed for income-producing properties you plan to hold long-term.
Hard money loans close much faster, often in 7-14 days. DSCR loans typically take 30-45 days, similar to traditional mortgages but faster than conventional loans.
DSCR loans usually require credit scores around 620-660. Hard money lenders focus more on equity and may approve lower scores, but rates vary by borrower profile and market conditions.
Yes, this is a common strategy. Investors use hard money to buy and renovate, then refinance to a DSCR loan once the property generates rental income.
DSCR loans typically have lower interest rates and fees for long-term holds. Hard money costs more but makes sense for short-term projects where speed matters most.