The Florida housing market is poised for success in 2025.
While the Sunshine State hasn’t been a stranger to the affordability issues plaguing the nation, it now has reached a balance thanks to rising inventory levels and sustained demand.
Real estate investors seeking properties in Florida are in luck—as long as they have the right financing tools.
In this article, we’ll look at the powerful potential of investments financed with debt service coverage ratio (DSCR) loans, including a step-by-step guide for securing a DSCR loan in Florida.
Start your application with Park Place FinanceWhat is a DSCR loan?
DSCR loan approval is based on the income potential of a property rather than the investor’s personal finances.
“DSCR” measures whether a property’s net operating income (NOI) can cover its debt obligations.
The formula is simple:
DSCR = Net Operating Income / Total Debt Service
A DSCR above 1.0 indicates that a property generates enough income to cover its debts, while a DSCR below 1.0 suggests the property may be unable to meet these payments.
A DSCR of 1.25 is considered strong because it demonstrates that the property generates 25% more income than needed to cover its debt.
DSCR loans are designed for investor needs
Because DSCR loans shift the focus to a property’s cash flow rather than the borrower’s income, they are ideal for real estate investors or those who may not qualify for “traditional” financing.
Benefits of a DSCR loan in Florida
DSCR loans offer flexibility that is ideal for investment purposes.
Let’s look at the specific benefits of a DSCR loan in Florida’s dynamic market.
No personal income requirements
With DSCR loans, borrowers are primarily evaluated based on the property’s financial performance.
This means:
- No W-2s or pay stubs
- No personal tax returns or employment verification
- Simple documentation requirements
Ideal for multiple properties
Real estate investors with growing portfolios often face challenges qualifying for traditional loans due to debt-to-income (DTI) ratio limitations or complications from owning multiple properties.
DSCR loans eliminate these hurdles thanks to their cash-flow focus, which results in easier financing for new properties and opportunities to scale portfolios.
Potential for higher loan amounts
Because lenders prioritize the property’s income potential, those with a strong cash flow or rental income may qualify for higher loan amounts.
Terms are more flexible because they’re tailored to the property’s earning potential. This is especially helpful for high-value or luxury properties in the Florida market.
Tailored for Florida’s thriving real estate market
DSCR loans are a strong fit for the Florida market for the following reasons:
- High rental demand: A thriving tourism industry and growing population solidify Florida as a hotspot for rental properties.
- Diverse properties: Florida has many investment options, from single-family rentals to vacation properties and multi-family units.
- Market growth potential: Property values and rental rates are expected to rise as the Florida economy grows.
- Business-friendly environment: A lack of state income tax and pro-investor policies creates a positive environment for real estate investors.
Interested in applying for a DSCR loan in Florida? Let’s look at the loan requirements to see if you qualify.
How to qualify for a DSCR loan in Florida
The most important qualifying factor for a DSCR loan in Florida is your DSCR ratio.
Let’s break down the DSCR formula:
- NOI: The income the property generates after operating expenses, such as property management fees, insurance, and taxes.
- Total Debt Service: The total loan payment, including principal and interest.
For example, if a property generates $3,000 in NOI and the monthly debt service is $2,500, the DSCR is:
$3,000 / $2,500 = 1.2
The property generates 20% more income than is required for the loan payment.
Additional requirements: Property eligibility, loan-to-value (LTV), and credit score
The property must meet specific criteria, including:
- Must generate rental income
- Certain property types, including single-family homes, multi-family units, vacation rentals, and other investment types
- Proof of rental income if the property is already generating income
Borrowers must also meet certain credit score and down payment requirements.
Typically, DSCR loans do not exceed 80% LTV. That means the borrower must put down 20% plus closing costs.
Documentation needed for the application process
Documentation requirements will vary by lender.
For example, Park Place Finance requests the following items:
- Purchase contract (if purchase)
- List of real estate owned
- Property insurance
- Driver’s license
- Last two bank statements
- Subject property lease
- LLC/entity docs (if an LLC)
- Loan payoff (if a refinance)
To improve your chances of approval, focus on properties with strong cash flow potential.
Step by step: How to secure a DSCR loan in Florida
Let’s look at the steps to securing a DSCR loan in Florida with a reputable hard money lender.
Step 1: Find a lender
Not all lenders offer DSCR financing, and the ones that do will have different terms and requirements.
Focus on finding a lender with extensive experience with DSCR loans and real estate investors.
Park Place Finance is a direct hard money lender with in-house capital. We’ve funded over $1 billion in loans across 17 years in business and 47 states.
Check out our reviews for insights from past clients.
Step 2: Calculate your DSCR and gather documentation
Prepare for your loan application by:
- Calculating your DSCR
- Compiling rental income records or preparing rental projections for new properties
- Collecting documentation of all expenses, such as taxes, insurance, maintenance costs, and HOA fees
- Getting an appraisal to confirm the property’s market value and expected rental income
Step 3: Submit your application
Complete the application form, attach all required documents, and submit it to your lender.
Stay alert for any additional questions or requests from your lender so you can keep the process moving. Park Place Finance can close in as little as seven days.
Step 4: Close the loan
Congratulations! On closing day, you’ll sign the closing documents, pay your closing costs, and receive your funds.
Potential challenges and tips for success
A low DSCR is the biggest barrier to approval for borrowers. Low DSCR typically results from high operating costs or insufficient rental income.
To overcome this challenge, make sure you calculate your DCSR before applying and make adjustments to improve cash flow, such as:
- Raising rental rates
- Reducing expenses
Apply for a DSCR loan with Park Place Finance
Park Place Finance is your trusted hard money lender for your next Florida investment property.
Whether you’re a first-time or seasoned investor, we are happy to help you navigate the lending process.
Start the DSCR process here or call us at (866) 407-1599.