My Realtor partner introduced me to an aspiring real estate investor. He had no cash to invest, but wanted to get started buying investment property.
The situation
Greg wanted to purchase a short-term rental. He found an investment property with strong cash flow, but he didn’t qualify for a traditional “agency” investment loan.
Why it started out broken
Greg had excellent credit, but he didn’t have the down payment required for an investment property. On top of that, his personal income wasn’t high enough to qualify for a conventional investment loan.
The fix
First, we set him up with a HELOC using our automated approval system. He had enough equity in his primary residence to access $80,000, which could be used toward his investment strategy. The HELOC funds were available just eight days after we started.
Next, we structured the purchase using a DSCR loan (Debt Service Coverage Ratio). This allowed us to qualify the loan based solely on the property’s rental income. We did not use his personal income at all. The appraiser’s fair market rent was sufficient to approve the loan.
The lesson
When traditional financing doesn’t work, it doesn’t necessarily mean the deal is dead. Sometimes the solution requires an unconventional loan structure.
The takeaway
In some cases, pairing two different loan types together is what makes the deal work.