If you want to start a real estate portfolio, it's time to turn your eyes to the Midwest.
With a Debt-Service Coverage Ratio Loan, or DSCR Loan, Illinois real estate investors are finding a quick and efficient avenue to begin or expand their portfolio; you could be next.
Visio Lending has a proven track record of helping investors get a solid footing in the real estate market. Whether you're looking at Illinois for long-term or short-term rental opportunities, our financial experts can set you up with the best loan terms for your situation.
Debt-service coverage ratio (DSCR) is the metric lenders use to provide an alternative lending solution that real estate investors often prefer to traditional loans. Since investors often have complicated tax returns, DSCR lenders rely on a property's cash flow potential rather than personal income verification.
Unlike traditional mortgages, DSCR loans rely on the DSCR ratio, which looks at the net operating income of the property rather than personal income. The property's income is divided by the mortgage payment to develop a ratio: a number higher than 1 means that the rental property generates income, while one lower means that it is a net loss. This allows DSCR lenders to understand the property's earning potential and requires little information from borrowers: no tax returns or bank statements here.
Thanks to the unique qualifications for a DSCR loan, it's much easier for self-employed borrowers to qualify, ensuring that anyone can begin generating rental income without any personal income verification.
DSCR loans in Illinois often have longer repayment plans, leading to lower monthly mortgage payments, and a higher Loan-to-Value ratio means a lower down payment.
Many investors in Illinois use DSCR loans to finance multiple properties, using the leftover rental income to reinvest and build up stronger cash reserves. While DSCR loans may have slightly higher interest rates, 1-2%, borrowers often find the loan terms preferable. A great credit score can also help you access lower interest rates, making this an even better opportunity to develop rental income.
Because DSCR lenders aren't bound by the same underwriting rules as traditional loans, processing times can be as little as a few weeks, allowing investors ample time to close the deal on their new investment property.
Many investors find that a DSCR loan is easier to qualify for than a traditional loan since it judges the property's net operating income against potential debt obligations; in fact, the DSCR loan is the most preferred loan type for investment property, thanks to its lack of personal income information and reliance on the DSCR ratio.
Illinois' tourism is recovering well post-pandemic, with the hotel industry breaking pre-pandemic records. Millions of people visit Illinois annually to enjoy a wide array of museums, national parks, historical locations, sporting events, and more.
2022 saw 111 million visitors and $44 billion in revenue, an increase of 14 million travelers and $12 billion in revenue from 2021.
Check out some of Visio Lending's recently closed DSCR loans in Illinois.