A DSCR loan qualifies a rental on whether its rent covers the payment, not on your personal income. For investors with several properties, self-employed income, an LLC or a home outside the United States, that is often the simplest way to finance a rental in South Florida.
The ratio
DSCR = monthly rent ÷ monthly payment, where the payment includes principal, interest, property taxes, insurance and condo or homeowners association dues. We prefer 1.0 or higher.
| Rent | Payment | DSCR |
|---|---|---|
| $3,640 | $2,800 | 1.30 |
| $2,800 | $2,800 | 1.00 |
| $2,520 | $2,800 | 0.90 |
What decides the ratio in South Florida
- Property tax. Use full market value without a homestead exemption. See our guide to Florida property tax for investors.
- Insurance. Windstorm and flood coverage are expensive. A newer roof, impact windows and a wind mitigation report can lower the premium. Get quotes early.
- Condo dues and assessments. They count in full, and new reserve rules have raised them in many buildings. See our guide to Florida condo rules.
- Long-term rent. Short-term rentals are banned or limited at many addresses, so we use leases or market rent.
Ways to make the numbers work
- A larger down payment lowers the payment.
- An interest-only period lowers the payment in the early years, and you can qualify on the interest-only payment.
- A 5-year prepayment penalty usually prices lower than a 3-year one.
- A newer roof and impact windows can lower the insurance premium.
Foreign nationals
Many South Florida rentals are owned by buyers from Latin America, Canada and Europe. Foreign nationals can borrow through our rental loan programs, often through a Florida LLC.
Terms are on the DSCR rental loans page.