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DSCR Loans in Miami-Dade County, Florida: No-Doc Way To Build Your Real Estate Portfolio Quickly

Miami is the quintessential tourist destination. It has excellent weather, plenty of things to do, and loads of fun people to meet. This thriving city has a booming economy, plenty of job opportunities, and many other things that make it an ideal place to invest in real estate.

Real estate investors are taking advantage of the huge real estate market using Debt Service Coverage Ratio and DSCR loans in Miami-Dade Country, Florida. They can venture into the booming rental market quickly without providing income verification.


Why get a DSCR loan in Miami-Dade County, Florida?

Here are some of the things that make Miami such a great place to invest in real estate:

  • Miami is a city that's always on the move. The cultural diversity, vibrant nightlife, and stunning architecture make it one of the best cities.

  • The county's economy is strong and diverse, with many industries contributing to its growth. These include agriculture, business services, education; health care; hospitality; retail trade; technology/e-commerce, and tourism. This also means plenty of jobs are available for those looking for employment or career advancement opportunities.

  • The climate in Miami-Dade County is perfect for enjoying your outdoor space year-round. It's sunny almost every day, and plenty of places to enjoy the sun with family and friends. There are also plenty of fun things to do indoors too!

  • The crime rate in Miami-Dade County is very low compared with other cities worldwide. The overall crime rate in Miami-Dade County is lower than any other U.S. city with over 1 million residents. You will find that most areas have little or no crime at all, making them safe places to live or work and invest in real estate.

  • DSCR loans in Miami allow investors to cash in on the booming real estate industry and take advantage of the high demand for rental properties. DSCR loans compare the investment cash flow against monthly payments to determine eligibility for the borrower.

  • The loan doesn't compare an investor's income, and this loan type doesn't follow strict lending procedures. This makes the process much faster and more flexible and accommodates all groups of people, such as self-employed borrowers.

How does a DSCR loan work?

Because of the lengthy documentation requirements, investors often find it challenging to prove they can repay a traditional loan. DSCR loans in Miami allow borrowers to obtain financing for purchasing real estate used for commercial purposes.

A DSCR loan works differently because it's not about your pay stubs or tax returns. This loan considers an investor's needs which is the property's income rather than their monthly income. An investor can qualify for a DSCR loan if the investment property's income exceeds the loan repayment amount.


What is the minimum DSCR to qualify in Miami-Dade County, Florida?

The minimum DSCR to qualify in Miami-Dade County is 1.0x. However, the DSCR value depends on the lender. Some lenders allow a DSCR of as low as 0.7, and others don't have a minimum.

It's essential to raise your DSCR as high as possible to have a higher chance of approval, mainly if you are a new investor.


DSCR mortgage rates in Miami-Dade County, Florida

DSCR mortgage rates in Miami are slightly higher than conventional loans. Most investors are comfortable with the higher mortgage rates because they don't have to provide income verification.


How is DSCR calculated?

A DSCR loan compares a property's income with full payment, including housing expenses such as principal, interest, taxes, and insurance (PITI).

DSCR is calculated based on the following formula: DSCR = Income / Payment

The answer is always written in decimals, such as 1.25 or 1.25x. Investment property with a DSCR of 1.25x means the income is 25% more to cover the total monthly payments.

The higher the DSCR, the better because the property brings in more money than the amount spent on servicing debts. A DSCR of below 1.0 means that the property's payments exceed its income and have a negative cash flow.


Here is an Example

If your property has a monthly income of $2,000 and a monthly mortgage payment of $1,400 has a DSCR of 1.43x.

You can improve your DSCR by reducing the payment and increasing rent as an investor. Using the above example, the DSCR is higher than 1.0, and you are considered safe from defaulting on your loan payments.

This means you generate enough cash flow to cover your loan payments and other overhead expenses like rent and utilities.


Example - How higher rent can improve DSCR

Income Payment DSCR
$1,200 $1,000 1.2
$1,500 $1,000 1.5

Example - How lower payment can improve DSCR

Income Payment DSCR
$1,800 $1,500 1.13
$2,500 $2,000 1.25

Tip - The above examples show how changing the rent and payment influences your DSCR. Lenders will only approve your application if your DSCR loan in Miami is higher, and you can increase the rent or lower the payments to get the perfect DSCR.

This might include moving the rent up to equal the nearby properties, improving the value of the rental, or investing more money in the property, which lowers the monthly payments.


How to calculate DSCR income

Income is the most critical factor in calculating the DSCR for a commercial property. The DSCR income for residential property uses the monthly rental income.

You would use the net operating income (NOI) for commercial property. NOI equals gross income minus maintenance expenses, taxes, and other operating costs.


How to calculate DSCR payment

The DSCR payment is your PITIA which includes principal, interest, taxes, insurance, homeowner association fees (HOA), and other fees.


DSCR loan guidelines in Miami-Dade County, Florida

Lenders have different requirements for borrowers to qualify for DSCR loans, but the process is faster and more flexible.

With DSCR loans, you don't rely on your finances, taxes, or income to qualify; this is a huge relief for most borrowers.

Here are some qualifications that your DSCR Miami lender will evaluate.

  • Loan-to-value (LTV) ratio - The max LTV for DSCR loans in Miami is around 75-80% which equals a minimum down payment of 20-25%.

  • Credit score - Ensure you have a minimum credit score of 640, which varies depending on the lender. Some lenders may consider borrowers with a higher score, while others would consider lower scores.

  • Verifying the property's future rental income - To verify a property's potential income amount, the appraiser must complete form 1007, Fannie Mae's Single-Family Comparable Rent Schedule.

  • Loan purpose - Borrowers can use DSCR loans to buy new residential properties, refinance an existing property or cash-out refinance.

  • Property types allowed - Lenders allow many property types, but this varies depending on the lender. The properties allowed include single-family residences, townhomes, condos, multi-family residences up to 4-unit properties, condotels, and apartment buildings with 5+ units, among many others. It's essential to check with your lender to see if they will accept the property you want to purchase.

  • Property use - You can use DSCR to purchase short-term and long-term rentals and cannot purchase primary residents.

  • Loan type - Most DSCR loan types include 30-year fixed rates, interest-only ARMs, and 5-year adjustable rates. You should check with your lender to determine the loan type they offer.

  • Income and employment, debt-to-income (DTI) ratio - Lenders don't use DTI ratios, income, and employment verification; instead, they use the property's income.

  • The maximum loan amount varies by the lender, but the maximum loan amounts are often up to $5 million.

  • Maximum properties owned - Most DSCR lenders don't limit investors on the number of properties they can own.

  • Prepayment penalties - Most DSCR loans have prepayment penalties if you pay the loan fast, refinance quickly or sell the home soon. Lenders have specific guidelines to deal with these penalties.

  • Cash reserves - Most lenders require borrowers to have at least 6 months of mortgage payments. In the case of DCSRs, which are low than 1.0, lenders require cash reserves of 12 months for the full payment.

  • Closing in the name of an LLC - Most lenders allow investors to close in an LLC.

  • Seller-paid closing costs - Most lenders allow closing costs up to a certain amount.

Graph of coin stack for real estate market


The five best cities to invest in Miami-Dade County, Florida

Miami-Dade County, Florida, is the home of Latin American culture and a bustling metropolis. It's also a prime location for real estate investments. Currently, Miami has the highest number of millionaire households in the country.

With a high population, the area is bursting with potential for development, making it perfect for investors looking for growth potential in terms of real estate prices and rental income. It has been cited as one of the top five cities to invest in.

Here we've listed the five best cities to invest in in Miami-Dade County, Florida.


Miami Beach

This city has a high rate of return, and this is due to several factors. First, the area is becoming more and more popular. New residents find the area attractive for its mild weather, culture, and entertainment.

Second, there is a large number of tourists that visit every year. In other words, people are always looking for property in Miami Beach.

In addition to these factors that make investing in Miami Beach real estate attractive, there are also many tax benefits. If you buy property at all three levels of government – federal, state, and local- you can take advantage of tax benefits such as depreciation allowances.


Little Havana

Little Havana is the heart of Cuban culture in Miami and has a history dating back to early 1900. When you decide to invest in real estate in Little Havana, you're not just investing in a home—you're investing in a wealthy place with history.

Neighborhoods like this are a big part of what makes Miami great, and by holding property here, you can take advantage of what this colorful neighborhood has to offer.

One key benefit of investing in Little Havana is that property values have been steadily increasing due to the rising demand for homes and businesses in the area.


Miami Gardens

Miami Gardens is an incorporated city of almost 100,000 people, growing rapidly as more and more people flock to South Florida. This city has many new construction opportunities, including retail space and condo developments catering specifically to snowbirds who want their retirement home with them year-round.

One of the best reasons to invest in real estate in Miami Gardens is that it's still affordable compared to some other parts of Florida.

Many people also move here from other states, increasing rent prices and making properties more valuable. The city's population is increasing exponentially, meaning more people are living there and looking for places to buy or rent.


Brickell

The Brickell area is one of the most promising markets in Miami, and it's not hard to see why. Its central location makes it ideal for professionals working in Downtown Miami, Coral Gables, and South Beach.

The area is home to some of Miami's newest luxury high-rises and condominiums, and its proximity to I-95 makes it an appealing option for investors.

In addition, the area is known for its trendy restaurants and walkability score, which means residents can access entertainment options without a car. Brickell's nightlife is incredibly vibrant, has a high concentration of wealth management firms, and is the international headquarters of companies.


Downtown Miami

This popular tourist destination offers investors plenty of opportunities for growth on their money. Downtown is known for both its residential and commercial development options—meaning that there are plenty of ways for you to invest your money.

Downtown Miami has become a trendy place for tourists and an excellent place to live for young people. The area has so many new high-rise apartment buildings and condos.


Five tips for real estate investors in Miami-Dade County, Florida

Miami-Dade County is a hotbed of investment activity, making it an ideal city for investors looking to get in on the ground floor of exciting new developments. Below are some tips to help you make the most of your investment:


It's all about location

Miami-Dade is a sprawling county with many lands, translating into plenty of opportunities for prospective investors. Spread out your investments over different areas of the county. That way, if one area starts to cool off, you'll still have plenty of other options in which to invest.

A solid real estate market isn't dependent on one neighborhood or submarket; it's a phenomenon that spreads across the entire metro area, so be sure to diversify your portfolio.


Think long term

Miami is booming, but that doesn't mean it will always be this way. As with any investment, you want to look at what's happening in the bigger picture and anticipate where things are headed.


Do your research

It's essential to do your homework in the neighborhood. There are more than just the typical things you'd look into when buying a house—you need to ensure it's located in an area where people want to live or do business.

Check out crime stats and local businesses for a better idea of whether or not an area is a good fit for what you're looking for.


Know your market

Different parts of Miami-Dade County have different climates, different cultural makeups, and different economies. The best way to know what's hot in this county is to immerse yourself in all its communities.

You'll get a sense of what's popular and what's not, which neighborhoods are booming and which ones aren't, which will help you make sound financial decisions.


Buy within your means

With plenty of gorgeous properties in Miami-Dade County, they look like they'd make perfect investments. But if you can't afford them or don't have access to financing, they're not going anywhere anytime soon.

If you're unsure what kind of mortgage payments you can handle on investment property, consider talking to a DCSR lender who will advise you accordingly.


FAQ's About DSCR Loan

  • Do you need a good credit score for a DSCR loan? - DSCR loans require investors to have a minimum credit score of 640. This varies as some lenders may allow a higher or lower score.

  • What is the minimum DSCR for Miami-Dade County, Florida? - The minimum DSCR score for a DSCR loan in Miami-Dade County, Florida, is 1.0x.

  • Are DSCR loans for 30 years? - Most DSCR loans are structured as 30-year fixed-rate loans, but they may be adjusted.

  • How do I qualify for a DSCR loan? - Most DSCR lenders require a DSCR of 1.25x. This means the property is bringing 25% higher income than a payment. Additionally, you have to meet other requirements.

Submit your DSCR scenario to get started

Are you looking for an investment property in Miami-Dade County, Florida? A DSCR loan is your go-to solution because it will provide you with a speedy and flexible way to secure property.

With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.

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