Home to many movers and shakers in American politics, Maryland has a strong economy of commuters who appreciate the convenience of apartments and small businesses.
While its population may not have the explosive growth of other states, it has grown steadily in 10 of the last 11 years, promising a constant flow of tenants and consumers for residential and commercial rental properties. What's more, the average annual salary in this state is $61,365, above the national average of $59,428.
DSCR loans are an excellent way for an experienced investor to gain an edge, as the streamlined process allows you to finance promising investment properties quickly while other investors are still seeking funding.
Visio Lending is one of the country's top debt service coverage ratio (DSCR) mortgage lenders, ready to provide you with the funds you need to get right into Maryland real estate with no delay.
Like other states, receiving DSCR loans in Maryland is mostly about the property's income potential and the money you put upfront rather than personal income. While you don't need to provide tax returns or bank statements, you must meet particular stipulations before private lenders approve you for a DSCR loan.
Private residential homes - those that aren't generating income - are not eligible for a DSCR loan. Rural lands are also generally prohibited; however, this isn't much of a concern in Maryland, which is highly urbanized.
However, the list of potential purchases you can make with DSCR loans is quite expansive, ensuring that real estate investors have plenty of options:
Visio Lending provides DSCR loans for 1-4 unit long-term rentals and vacation rentals.
To receive DSCR loans, real estate investors should expect to have a credit score of 680 or better. If you still need to build up your credit score but wish to enter the real estate market, we can recommend other options, such as conventional loans.
The debt service coverage ratio is how lenders evaluate whether the property's net operating income will cover your monthly mortgage payment. If it's below 1, you have a negative cash flow, while a DSCR above 1 shows that the property's cash flow exceeds your loan payments and you're generating income. Most lenders want a DSCR of at least 1.2, though many will expect higher.
A DSCR lender wants a loan-to-value ratio (LTV) of 80% at most, with 75% being more standard. This means you must provide a minimum down payment of 20%.
Most private lenders who offer DSCR loans include a prepayment penalty: a percentage of the principal that's taken if you pay your loan amount ahead of time. This protects non-bank lenders from loss on a DSCR loan; it is usually on a "step down" basis, with decreasing penalties for the first few years.
It's important to note that in Maryland, the prepayment penalty can only be applied for the first three years of the loan, which means that the "5/4/3/2/1" step-down prepayment penalty is not applied in this state.
Maryland has numerous different small towns hiding perfect investment property, so it's essential that you take your time and research each one before deciding where to pursue DSCR loans in Maryland. Our top five picks are based on expected rental income and overall prospects.
Close to Washington, DC, Columbia has a vibrant commuter community and a busy downtown. The average rent is $2,066 monthly, while commercial rental income is about $26.10 per square foot. What's better, rents have increased by about 1.7% yearly, and commercial vacancies have dropped significantly.
One of the state's largest and most well-known cities, Baltimore relies on a mix of manufacturing, technology, and shipping to earn its keep; this diverse economy gives real estate investors plenty of options for developing rental income. The average rent for all residential property types is $1,500, while commercial space rents for $27.78 per square foot.
Prince Frederick is mostly known for its small-town charm and plentiful tourist attractions, meaning that vacation properties do very well here. Accordingly, rental income is higher here, at around $2,500; however, commercial space is cheaper, averaging $19.33 per square foot.
Hyattsville is known for its affordable housing and is considered a "hidden gem" by Maryland real estate investors, who see great promise in its population growth and urban development initiatives. Average rents here are $1,634 monthly, and commercial space runs for $27.00 per square foot, which is quite high considering its small size.
Chesapeake City is a popular vacation destination with a fascinating view of the harbor from land. Despite the plentiful foot traffic, renting is very affordable here at $1,177 per month, and commercial space is also cheaper at $23.81 per square foot. This makes it a great entry for younger developers who would like to leverage Maryland DSCR loans to build up their portfolio.
Check out some of Visio Lending's recently closed DSCR loans in Maryland.