What loans are available for real estate investors?

DSCR loans — the core investor product

Debt Service Coverage Ratio (DSCR) loans are the standard vehicle for rental-property investors. Underwriting is based entirely on the property's cash flow: if the property generates enough rent to cover the mortgage payment (DSCR ≥ 1.0x), the borrower qualifies — no W-2 income verification, no DTI calculation, no tax returns required. DSCR lenders typically require: 680+ FICO, 20–25% down on investment property, and a DSCR of at least 1.0x (some lenders accept 0.75x at higher rates). Rates are typically 1–2% above conventional owner-occupied rates due to higher default risk on investment property.

Fix-and-flip financing

Fix-and-flip loans are short-term (6–24 months), asset-based loans that fund property acquisition and renovation. Underwriting is primarily LTV-driven: lenders fund to 65–75% of ARV (after-repair value). Rates are higher than conventional loans (8–13% typical), with origination fees of 1–3 points. Exit strategy (sale within the loan term) is underwritten, not just the acquisition. No personal income verification in most cases — the deal economics carry the underwriting. The financing is the easy part to standardize — renovation-cost estimation and margin discipline are where flips actually fail, which is the gap ClearValue Books' best real estate books for house flipping is built to close.

Hard money loans

Hard money is asset-based lending at the most flexible credit tier — lenders primarily care about LTV (typically 60–70% max) and exit strategy, with minimal credit and income requirements. Rates are the highest in the real estate investor product stack (10–15%+), terms are short (12–18 months), and fees are significant. Hard money is typically used for deals that don't qualify for DSCR or fix-and-flip products due to property condition, credit issues, or deal speed. It's a bridge instrument, not a long-term hold product.

SBA exclusion — real estate investors are not eligible

SBA 7(a) and 504 programs explicitly exclude passive real estate investment — purchasing or holding property primarily for rental income is not an eligible SBA loan purpose. This is a hard exclusion, not a guideline. Real estate investors seeking financing must use private lenders, portfolio lenders, or DSCR-specialized lenders. The CFPB maintains resources on investment property lending at https://www.consumerfinance.gov/. SBA eligible-use guidance: https://www.sba.gov/funding-programs/loans/7a-loans.

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