Loading
in San Juan Bautista, CA
San Juan Bautista investors face a choice between two non-traditional financing paths. DSCR loans work for buy-and-hold rental properties, while hard money suits fix-and-flip projects or quick acquisitions.
Both skip the W-2 income verification that stops most investor deals. The right choice depends on your timeline, exit strategy, and whether the property generates immediate rental income.
Most investors I work with use DSCR for stable rentals and hard money for properties that need work. Understanding the cost and timeline differences prevents expensive mistakes.
DSCR loans qualify you based on rental income divided by the monthly mortgage payment. You need a ratio above 1.0, meaning rent covers the full payment with room to spare.
These are 30-year fixed loans with rates typically 1-2% above conventional mortgages. You'll need 20-25% down and a credit score around 660 minimum.
DSCR works when the property is already rented or market rents clearly support the payment. Lenders use actual leases or appraisal rent estimates to calculate the ratio.
Closing takes 30-45 days, similar to conventional loans. This timeline works for standard purchases but loses most foreclosure auctions or competitive situations requiring speed.
Hard money lenders fund based on property value, not your income or the rental performance. They'll lend 65-75% of the after-repair value for properties needing renovation.
Expect rates between 9-14% with 2-4 points upfront. Terms run 6-24 months because these are bridge loans, not permanent financing.
Approval happens in days, funding in 1-2 weeks. This speed wins foreclosure auctions and competitive situations where cash offers dominate.
You need an exit strategy before closing. Most borrowers refinance into DSCR or conventional loans after completing renovations, or they sell the property outright.
The rate gap is stark. DSCR runs 7-9% currently while hard money hits 10-14%. Hard money adds points that DSCR loans don't charge, increasing upfront costs significantly.
DSCR requires the property to cash flow from day one. Hard money doesn't care about rent because you're exiting before long-term performance matters.
Timeline separates these options more than anything. DSCR takes a month-plus while hard money funds in under two weeks, making it the only option for courthouse steps purchases.
Down payments differ too. DSCR wants 20-25% of purchase price. Hard money lends against after-repair value, so your cash requirement depends on renovation scope and property condition.
Use DSCR when buying a rental property in livable condition that generates immediate income. The lower rate saves money over 30 years, and the fixed term provides stability.
Choose hard money for properties needing major work, foreclosure purchases, or situations where speed wins the deal. Pay the premium for flexibility and fast execution.
Many San Juan Bautista investors use both strategically. Start with hard money to acquire and renovate, then refinance into a DSCR loan once the property is rent-ready and cash flowing.
Your credit score matters more for DSCR. If you're under 660, hard money may be your only option until you improve your profile or find a property with exceptional rental performance.
Yes, if the property is habitable and can generate rent immediately. Lenders calculate DSCR based on market rent, so cosmetic updates don't disqualify you.
Most lenders offer extensions for 3-6 months with additional fees. Plan your renovation timeline conservatively and secure refinancing commitments early.
Some lenders accept short-term rental income with proper documentation. You'll need booking history or market analysis showing consistent revenue above the payment.
Yes, most hard money lenders approve deals with 550+ credit if the property numbers work. They focus on asset value and your exit plan.
Expect 2-3% in closing costs plus any prepayment penalties on the hard money loan. Factor these costs into your renovation budget from day one.