DSCR Loan Resources | Estimating Value and Income

DSCR Loan Resources. Hey, what's going on everybody? Jeff Traverthin, Jeff the Mortgage Pro. Thanks so much for joining me today. Love that you get a chance to watch my videos. Thank you so much for clicking on this link and hopefully find these things valuable. If you do, do me a huge favor. Go ahead and click on that like button down below. And if you really like this different stuff that I put out, go ahead and click on the subscribe button. And then that way you'll be able to see the different videos when they come out into your feed. Okay. So today we're talking about DSCR Loan Resources, and there's a couple of different things that I want to talk to you about that are useful because there's often questions that come up on how do we determine a couple of different things. So the first question that I get a lot of on determining what we're going to do for a DSCR loan is how do you project the value for the property? So obviously this is something that if you're searching for a property and you have a real estate agent that you're working with, they can do a comparative market analysis to help you determine what that value is. They're going to look at other comparable properties. They can probably pull data off the MLS and they'll be able to determine what that rental income is or the value is for you on that particular property. The second way that you can do is to look at some of the basic websites like Zillow, Redfin, Realtor.com, et cetera. Oftentimes those sites will have values on there. And what I would say is that if the values are close to each other, then the more accurate that that number probably is. So if one of them says the value is 200 and the other one says it's 205, then that is probably a pretty accurate estimate of what the value of the property is. But if one site says 200 and the other one says 400, then we've probably got a little bit of a discrepancy in there. So I'm going to do some really crazy work here and this is the way that I would do this is I would look at both of those websites. If there's only two of them and one of them gave a $200,000 value and the other one gave a $400,000 value, I'd literally just take the middle of those two numbers. So 300,000 would be the number that I would use for the value. So it's hard to determine if it's, you know, if there's not a fairly accurate estimate out there, that's definitely some instance where you would probably want to have your real estate agent work on a comparative market analysis for you to really determine what the value of the property is. Okay. So remember, this is just a projection. This is not something that's accurate to the T. The appraiser is going to determine what the value is of the property and that's the number that we have to rely on when we're doing a DSCR calculation anyway. Okay. All right. Another question that I come across often is, especially if you're buying a property is how do you determine what the rental income is if we're looking at a long-term rental property for a DSCR loan? That's a good question. I look at, you know, if you really think about it, like, how do you do that? So let me go through a couple ways that I look at how to figure out what the rental income of the property is. And we're just using resources that you can find online for these types of things. The first one, which is a free resource, just look at Zillow. Zillow is going to give us sometimes a rental Zestimate, and that's going to be fairly accurate. That's going to be a number that other properties that are similar bedroom and bathroom counts, you know, within that area are renting for, and that's kind of an accurate number. So if we really are just trying to get a ballpark, then Zillow is the easiest thing to go to, and that's something that's free, so you don't have to pay for it. The problem is that if sometimes the rental estimate is not on there, then we need to look at other sources. Okay. So the second one that you can look at is something called rentometer.com, and I'll put a link for that down below in the video here. This one comes with a small membership cost, but basically, again, this one has probably a little bit more accurate data. And what you could do is look at the numbers in there. You put in the bedroom and the bathroom account, you put in the address, and it's going to run comparable rentals in the area based off of data. And that is going to give us a fairly accurate representation of what the monthly rental income of your property that you're buying should be. So it's going to be pretty close. It's not the end-all, be-all, say-all number, but it is usually going to be pretty close to what the appraiser determines what the market rent should be for the property. So rentometer.com is another resource. And then the other one that I really like is rentcast.io. This one seems to be the most accurate. It just seems a little bit more modern. I kind of like it a little bit better. So this one, again, comes with a membership cost, but it's worth it. Again, what it's going to do, you're going to enter some data in there. You're going to enter that property address, bedroom and bathroom count, and then you're going to be able to help determine what the market rent is using the rentcast.io.com. So that's my favorite one. That's another paid one for you to use though. So take a look at that one and see if it works for you. Okay. Just remember the appraisers, the one that's going to ultimately determine what the value of the property is for us. And so how they're going to do that is that during the appraisal process, they're going to do the appraisal itself, which is going to look at the different values of the property. They use the sales comparison approach and looking at properties that have sold over the last six months, up to a year, and determine how much those properties sold for. They're going to make adjustments for bedroom and bathroom counts. They're going to make adjustments for amenities, things of that nature. And that's how they're going to determine the value of the property. But they're going to do the same thing. They're going to do a long-term rental survey, also called a 1007. And then on the long-term rental survey, what they're going to do is look at different bedroom and bathroom counts or same, excuse me, the same bedroom and bathroom counts of similar properties in the area and figure out what the rent is on those properties. And then they're going to, you know, determine how much this property should rent for. Now, this is the rental income that we need to use for the actual calculations of doing the loan. It's called the market rent. So again, we're going to do the best that we can to try to determine what that number is going to be in advance. But the number that we ultimately have to use for our calculations is the, uh, the market rent that is determined by the appraiser. Now that's not to say that you can't rent the property out for more after you're done. You absolutely can. You could probably get a section 810 in there in some instances and get even more than what, you know, beyond what you think you're going to be able to rent it for, and that could be government assisted, you know, guaranteed income. If you happen to be renting it out as a section eight, but, um, you can always rent it out for more, but again, for the purposes of doing the loan, we have to use that market rent as determined by the appraiser. Okay. All right. And then the other way, uh, another question I get to when we're doing DSCR loans is if we're buying a short-term rental property, how do we determine what the short-term rental income is of the property? And again, this is, this one's even trickier because oftentimes there's not a lot of resources out there to help us be able to do this. So, um, there's one paid membership that I know of there may be more. And if you know, know some more, please make sure you list them in the comments down here. The main one, and then one that a lot of lenders actually use to determine what the rental income of a property is, is called AirDNA. And I'll put a link for that one down there below. This one again has a membership cost associated with it, but at the same time, it is totally worth it. Um, what I love about the AirDNA is that it gives us the occupancy. So as long as we have enough occupancy to be able to do this loan, we can use the AirDNA data as the projected rental income of the property. The appraiser doesn't need to do anything after that, which is great because anytime we can, you know, eliminate somebody else's opinion of value or of rental income in there, that's going to be huge. So if the AirDNA has occupancy of 51% or greater, then we can typically use that AirDNA data to make it work. And then, um, it's going to give us average nightly rental rates. Now, obviously there's, you know, seasonality and some, some rental markets. So it takes that into consideration. It's going to project us what our yearly income should be based on that particular property. And we can determine a monthly rental income from that yearly rental income that you get. So AirDNA is the way to go. And again, I'll put that link down below. So that's another, um, you know, way to do this. So if income does come in lower, uh, you know, make sure that, you know, remember like, let's say the occupancy is like 48%, so it not quite meet the minimum occupancy for some lenders. And what they would need to do is they need, need to do a short-term rental survey as well. So they would look at comparable, uh, short-term rentals in the area, similar bedroom and bathroom counts, and they would determine what your projected short-term rental income is from that. So if the AirDNA data is not perfect and in some markets, maybe there's not enough comparables. Maybe there's not enough data to be able to determine if it's a great short-term rental or not. Don't discount that we can't do the loan. Just, um, know that we're going to have to look at for some other sources and appraisers can have to help us out in determining what the short-term rental income is. So those are the three things that I wanted to talk about this video for loan resources. Number one, how do you determine value of a property? Number two, how do you determine the long-term rental income of property, especially if it's not a long-term rental already, and then how do you determine a short-term rental income of a property, especially if it's not a short-term rental already. Okay. So hopefully we met all those different things. I'm going to put some links down below. If you want to talk to me more about this, I'm going to put my calendar link down in the description as well. So if you have it, um, go ahead and click on that and reach out to me. And I'd love to be the one that chats with you and helps you out with any resources you need for DSCR loans. So thanks so much for watching guys. Have a great day and I will talk to you soon. Bye.