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in San Carlos, CA
San Carlos real estate investors face a critical choice between DSCR loans and hard money loans. Each serves distinct purposes in your investment strategy, with different timelines, costs, and qualification requirements.
DSCR loans provide long-term financing based on rental income, while hard money loans offer quick capital for acquisitions and renovations. Understanding these differences helps you match the right financing to your specific project in San Mateo County's competitive market.
DSCR loans qualify you based on your property's rental income rather than personal tax returns. The debt service coverage ratio measures whether monthly rent covers the mortgage payment, typically requiring a ratio of 1.0 or higher.
These loans function as traditional 15- or 30-year mortgages with fixed or adjustable rates. You'll close in 30-45 days and hold the property long-term as a rental investment in San Carlos neighborhoods.
Expect down payments of 20-25% and rates that reflect the no-income-verification structure. Rates vary by borrower profile and market conditions, but DSCR loans cost less than hard money while requiring stronger property performance.
Hard money loans prioritize the property's value over your financial profile. These short-term loans close in 7-14 days, making them ideal for competitive San Carlos purchases where speed matters.
Lenders focus on the after-repair value and your exit strategy rather than rental income or tax returns. You'll typically borrow 65-75% of the purchase price or ARV, with loan terms of 6-24 months.
Interest rates run significantly higher than traditional financing, often 9-14%, with points charged at closing. These loans work best when you plan to renovate and either sell or refinance into permanent financing quickly.
Timeline separates these options most dramatically. DSCR loans take 30-45 days but offer 30-year terms, while hard money closes in under two weeks but requires payoff within 6-24 months.
Cost structures differ substantially. DSCR loans charge lower interest rates suitable for long-term holds. Hard money loans cost more upfront with higher rates and points, but provide the speed needed for fix-and-flip projects or competitive offers.
Qualification criteria target different investors. DSCR loans require stable rental income and property cash flow. Hard money lenders emphasize equity position, property value, and your renovation or exit plan rather than ongoing income metrics.
Choose DSCR loans when buying rental properties you'll hold long-term in San Carlos. If your investment strategy focuses on cash flow and appreciation over years, the lower rates and extended terms make DSCR financing more economical.
Select hard money for time-sensitive acquisitions, renovation projects, or properties that need work before qualifying for traditional financing. The speed lets you compete with cash buyers, while the asset-based approval works for properties DSCR lenders would reject.
Many San Mateo County investors use both strategically. They might purchase and renovate with hard money, then refinance into a DSCR loan once the property is rent-ready and cash-flowing. This combination maximizes both speed and long-term affordability.
Yes, this is a common strategy. Complete your renovations with hard money financing, establish rental income, then refinance into a DSCR loan for lower rates and long-term stability.
DSCR loans cost significantly less for long-term holds due to lower interest rates. Hard money costs more but provides value through speed when timing matters for your acquisition or project.
DSCR loans work well for first-time rental property investors with adequate down payments. Hard money typically requires renovation experience or a strong team, making DSCR more accessible for beginners.
DSCR loans typically require 20-25% down for investment properties. Hard money lenders usually fund 65-75% of purchase price or ARV, meaning you need 25-35% down plus renovation reserves.
Hard money specifically serves properties needing renovation. DSCR loans require rent-ready properties with established or projected rental income, making them unsuitable for major rehab projects.