If you wish to buy rental houses or commercial premises, an investor cash flow program is worth considering.
So, What is an Investor Cash Flow Program?
An investor cash flow program is a loan facility available to real estate investors who want to build or expand a portfolio of revenue-generating properties. Investors can qualify for a loan based on the potential cash flow from their rental or commercial properties without the need for complete documentation.
Unlike other loan programs, investor cash flow loans do not require information about your income or tax returns. In essence, the lender does not have to verify your employment status before issuing the loan. Your rental income is all that matters when seeking financing for real estate investments.
How Do Investor Cash Flow Programs Work?
To grasp how an investor cash flow program works, you need to understand a few related definitions. First on the list is cash flow. As the phrase implies, cash flow is the money that comes in and goes out of your business. Therefore, property cash flow is the difference between rental income and operating expenses, inclusive of debts.
Investor cash flow programs work based on the cash flow of the property in question. The lender will calculate the debt service coverage ratio (DSCR) to determine how much money you qualify to borrow.
The debt service coverage ratio measures the ability of an investor to repay their current debts using their operating income. If you intend to invest in real estate, the lender will calculate your property’s cash flow to establish if you can repay your debt obligations using your net rental income.
The DSCR is usually your net operating income (rental income) divided by your total debt service.
Your net operating income is equivalent to your revenue minus operating expenses, while your total debt service refers to your current debt obligations, including Principal, Interest, Tax, Insurance, Association Dues.
A DSCR value greater than one means there is adequate cash flow to repay your debts, while a value lesser than one means you cannot afford to meet your debt obligations.
Qualification Requirements For an Investor Cash Flow Program
Securing a loan through an investor cash flow program might seem easy, but this is not always the case. You must meet various (sometimes stringent) requirements to qualify for the loan.
Here are a few points lenders consider before issuing investor cash flow loans:
Debt Service Coverage Ratio
As discussed, lenders usually calculate a borrower’s debt service coverage ratio before issuing the loan. The DSCR is your gross rental income divided by your debt service. If your DSCR is above a particular value, you qualify for an investor cash flow loan.
FICO Credit Score
Like any other loan, your credit score is a determinant when applying for a property loan. Different lenders have different FICO score requirements. Some demand a minimum of 600, while others have a minimum of 700 FICO score to qualify.
Your housing history may also be a requirement for an investor cash flow program. However, this requirement can be restrictive, especially to investors who want to buy their first rental property. Some lenders require borrowers to have one primary home before applying for financing, while others do not consider your housing history important.
Number of Properties
The number of properties you want to invest in may also come into question during the application process. Some lending institutions are only willing to finance single properties, while others have no limit on the number of properties funded.
Most lenders prefer the financed property to be under the name of an individual borrower rather than a Limited Liability Company. This is because most LLCs may not have a history of income or an established credit.
It is usually hard to get financing for non-warrantable condos since many lenders consider them riskier than regular units. Non-warrantable condos do not meet conventional real-estate guidelines, and governmental entities cannot repurchase them. Fortunately, many investor cash flow programs overlook this requirement.
LendSure’s Hassle-Free Investor Cash Flow Program
Securing a property loan through an investor cash flow program can be tricky, considering all the requirements demanded by lenders. Fortunately, this is not the case with LendSure. Our investor cash flow program is fast with minimal conditions.
Here are LendSure’s hassle-free requirements for a property cash flow loan:
- No tax returns, income, or employment information
- Minimum DSCR – 0.75 for new purchase and 1 for refinance
- FICO Score – 660
- Loan amount up to $1,000,000
- Multiple financing at the same time
- Cash-out - $500,000
- 80% loan to value for a new purchase
- No limit on the number of properties financed
- Non-warrantable condos accepted
Contact us today to learn more about our investor cash flow program!