Most rental property in Charleston is financed in one of two ways: a conventional mortgage that examines your personal finances, or a DSCR loan that examines the property’s. For investors with several properties, self-employment income or a full conventional quota, the DSCR loan is usually the one that works.
The ratio
DSCR means debt service coverage ratio. Divide the monthly rent by the monthly payment. The payment includes principal, interest, property tax, insurance and any association dues.
| Rent | Payment | DSCR | Result |
|---|---|---|---|
| $3,900 | $3,000 | 1.30 | The property earns 30% more than it costs |
| $3,000 | $3,000 | 1.00 | Break-even |
We like to see 1.0 or better. Strong borrowers can qualify under 1.0 with a larger down payment.
Which rent counts in Charleston
In much of the country, the question is whether a lender will count Airbnb income. In Charleston, the first question is whether the property is allowed to earn it. The City of Charleston limits residential short-term rentals to homes where the owner lives on site, so an investor-owned house in the city is underwritten on long-term or mid-term rent.
- Long-term rentals are qualified on the lease, or on market rent from the appraisal if the property is vacant.
- Mid-term rentals, furnished and leased for a month or more, are qualified on their rental history. They are popular near the hospitals and the bases.
- Vacation rentals in towns that license them, such as Isle of Palms, are qualified on 12 months of history or AirDNA projections counted at about 70 to 80%.
What goes into the payment here
- Property tax at South Carolina’s 6% assessment ratio for rentals, not the 4% owner-occupied rate the seller may have paid
- Flood insurance where the property is in a flood zone that requires it
- Wind and hail coverage close to the coast, sometimes on a separate policy
- Association dues in condos and planned communities
These items decide more Charleston rental loans than the interest rate does. Get real figures for each before you write an offer.
What we finance
- Single-family rentals, duplexes and small multifamily
- Condos, including non-warrantable condos
- Licensed vacation rentals
- Property owned by LLCs, out-of-state investors and foreign nationals
Leverage is up to 85% loan-to-value on a purchase and up to 80% on a cash-out refinance. The minimum credit score is 600, at up to 70% loan-to-value.
Applying
- Send us the address, the price and the lease or rental history.
- We calculate the ratio and tell you the leverage it supports.
- Provide two months of bank statements and, for an LLC, the entity documents.
- The appraisal is ordered, and the loan closes in about 30 days with your closing attorney.
Details and terms are on the DSCR rental loans page.