If you are looking to purchase your first rental property with a DSCR investment loan, you may see some unexpected surprises. The most important thing with this type of loan is the appraisal. It will tell you crucial details that can make or break a deal.
Besides the rental income and value there are issues with the property that can come up if you are not careful before the appraiser come out to inspect the property:
- Small issues that lead to big ones: water spot in the ceiling? Is there roof issues, mold, broken upper floor windows, etc. You’ll be asked to get a quote to repair or asked to fix it before closing.
- Broken windows: Always a no. Need to be fixed before closing or money will be held in escrow.
- Foundation issues: this can be brutal. Make sure anything an appraiser will see is fixed.
- Missing flooring: Lay all flooring or carpet or tile or whatever you may need so it looks ready to move your grandma in.
- Smells: This could mean water damage, leaks, cracks in the walls or roof, rodent damage, or other things that let the elements in the house.
- Power off: with extreme weather, utilities may be turned off if the property is not occupied. You will have to pay for the appraiser to come out again and check these things are turned on and working.
- Occupied: The owner is moving out and turning the property into a rental. Or it is vacant but a tenant moved in after the appraisal inspection. These things can kill a loan.
There are many small issues that can kill a deal. It is best to talk with your lender and flesh out anything that may cause issues. The property being in the right condition is much more important than if you just maxed out your credit cards.
Leave a Reply
You must be logged in to post a comment.