What is an Investor Cash Flow Loan?

If you’re thinking about investing in real estate, you’re in good company. The commercial real estate market is booming, with experts predicting a strong performance going forward, driven, in part, by a shortage of residential housing supply and rising apartment rents. And perhaps more than any other mortgage product, one loan is designed specifically for real estate investors: Investor Cash Flow. Let’s look at how and why this may be a good option to consider while building your real estate portfolio.

Approval is based on a property’s potential.

Unlike most other property financing options, which consider an applicant’s personal debt-to-income ratio, tax returns, and employment documentation, an Investor Cash Flow loan bases qualification on the cash a property will generate when rented. Loan approval is more than likely if the amount of the gross rent to be collected is higher than the total cost of the mortgage. In short, what comes in will be greater than what goes out.

Who can qualify for an Investor Cash Flow loan?

As this mortgage product is only for investors with some experience buying real estate, first-time homebuyers are not eligible. Borrowers with credit scores as low as 600 may qualify. And the borrower will probably have to be able to put down 20% of the property’s value in cash, as Investor Cash Flow loans are generally for financing up to 80% of an investment property.

What types of properties are eligible?

Borrowers can use Investor Cash Flow loans to purchase primary residences, second homes, and a range of different investment properties, including one- to four-unit residential buildings, mixed-use, planned unit developments, and warrantable condos. One can even finance multiple properties, which is feasible given that Investor Cash Flow loan amounts go up to $3.5 million.

What are some important details?

If the property currently has a lease, that amount will be used to determine future rent. If not, an appraisal will be used to calculate the debt-service coverage ratio (DSCR), which is the gross rents divided by the qualifying mortgage-payment components, including principal, interest, taxes, and insurance. In the case of refinancing, the requirements are similar with an added need for leases from the past 12 months.

How hot is the real estate investment market? In the first quarter of 2022, the volume of commercial real estate in the U.S. saw a 45% year-over-year jump. If you’re ready to join this rising tide of investors, contact one of our expert loan originators to talk about an Investment Cash Flow loan.

Disclaimer: Please note that underwriting guidelines are subject to change and may have already changed by the time you are reading this post. Always check with a mortgage loan originator for the most accurate and updated information on loan requirements.