Real estate investors have boundless options throughout America; many flock to the coastal states or the largest cities, knowing they can secure high-income rental properties. However, there are plenty of reasons to consider DSCR loans in Ohio, a state with vast untapped potential.
Home prices in Ohio have risen by about 4%, and economists predict that this number will increase to 6% growth by the end of 2023.
For those investing in commercial real estate, the numbers are even more promising: Ohio ranks third in the country for commercial real estate, proving that this is an excellent place to invest.
There are a number of major market players holding offices in Ohio, including Nestle, Sherwin-Williams, JP Morgan Chase, Progressive Insurance, and KeyBank. All of these employees need housing; plus, where there is a major industry, small businesses, like coffee shops, grocery stores, and boutiques, thrive as well.
In general, Ohioans are aging: there's expected to be a 33% increase in individuals over 60 by 2030. Aging often means downsizing, and many senior citizens prefer the comfort of a managed environment like an apartment, townhouse, or condominium.
When it comes to getting involved in real estate, DSCR loans are one of the best options, and Ohio makes it incredibly easy to secure the funding you need to thrive. There are few requirements of individual lenders, as the loan-to-value ratio is determined by the property's cash flow rather than personal income.
Unlike traditional home loans, you don't need personal income verification, tax returns, or a low Debt-to-Income ratio to qualify. It's a very streamlined process, meant to encourage more investment in the Buckeye State. You need very little or no personal income documentation to apply: no bank statements, no pay stubs, and no information on your debt payments. All that matters is the debt service coverage ratio for the property itself.
Many states have quite a high DSCR minimum loan amount for investment property, but in Ohio, you can receive a loan of as little as $75,000.
If you're thinking big, however, rest assured that you can also seek even larger property; the maximum loan for DSCR lenders in the state is $5 million.
On average, DSCR loans have interest rates only 1% to 2% higher than that for traditional mortgages, meaning that your mortgage payment won't be much higher than it would be if you were purchasing a home for individual use.
Like in other states, the primary requirements for DSCR loans focus on the property's ability to generate income rather than the borrower's personal income or creditworthiness.
Lenders prefer that a borrower's credit score be above 680; this is similar to that for traditional home loans, so if you qualify for traditional mortgages, you can likely get a DSCR loan as well. Some lenders will accept scores as low as 620, but this is very rare.
You will need to prove that the property is worth the purchase price by having an appraiser complete an appraisal form on the property. You'll also submit lease agreements to show the rental income for this property.
Whether or not there are lease agreements to prove the property's income, you will have to complete the 1007 Rent Schedule, which identifies the average monthly rent expected for the rental property. This will identify the property's financial viability and is used to calculate the DSCR.
The DSCR lender wants to see that the borrower's property income is enough to service the loan payments, which means they either need to break even or generate income. The minimum DSCR is generally 1, but many will want a ratio of 1.2 or higher before they will approve a mortgage.
The loan-to-value ratio refers to how much you are borrowing for the subject property as opposed to its appraisal price; it's closely tied to your down payment. For DSCR loans in Ohio, lenders usually want to see an LTV of 80% or lower, meaning that you'll have to provide a down payment of at least 20%. However, many lenders will expect an LTV of 75% or less, necessitating a 25% down payment.
As with conventional loans, you need to provide a down payment for DSCR loans. This is generally 20% or more, but your minimum down payment is determined by your credit score and the property's cash flow as determined by the DSCR. You will also need to pay closing costs as with other real estate investments.
The process to receive an Ohio DSCR loan for the budding real estate investor is quite straightforward, consisting of only a few steps.
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First, you'll need to find a property that you'd like to purchase, then research DSCR lenders in the area. Visio is one of the best DSCR lenders in the market, but we encourage you to see for yourself by comparing our rates and options to those of other DSCR lenders in the region.
Like with other loans, you will apply for the DSCR loan with your borrower information, but you won't generally need to include things like pay stubs, tax returns, or bank statements.
When you apply for a DSCR loan, they will want to see the net operating income for the potential investment properties you'd like to fund. You will submit financial statements, lease agreements, and any other documentation you have for rental income verification.
Both the purchase price and the property's ability to generate income are considered when identifying the DSCR, so you'll have to have it appraised by a qualified appraiser before the deal can move forward.
In addition, the 1007 rent schedule is usually required even if you provide rental income information elsewhere, as it identifies the average monthly rent for the area and will be used to estimate the property's income.
From this information, the lender will calculate the DSCR using the expected rental income and your monthly mortgage payment to see if the property's income justifies the loan. As mentioned, different DSCR lenders have different minimum DSCR.
If the DSCR is sufficiently high enough, your DSCR loan will be approved, and you'll receive the funding. Now, you'll pay your closing costs and down payment, then receive the keys to get started generating cash flow from your rental property.
As Ohio is so diverse, you need to hone in on the specific real estate market of Ohio in which you'd like to pursue debt service coverage ratio loans, then research its average property values, market rent prices, and regional taxes you'll be expected to provide.
Here, we've broken up these sections to explain the average monthly rent and home prices, then zeroed in on specific towns that are worth a second look when determining whether you'd like to apply for DSCR loans here. These areas have fast-growing economies, rising populations, and numerous cultural attractions that will draw in plenty of tourists, making them great choices for either residential rentals or storefronts.
Property values in Northwest Ohio are around $229,987 for single-family homes, but this varies immensely by town. Rental properties for residential real estate investors can make about $1,000 a month, while commercial real estate generates around $2,500 per month throughout the region.
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ToledoThe fourth-populous city in the state, Toledo residents have an average income of $53,600, making the affordable rental property market very attractive here. The city is undergoing a strong community revitalization, which significantly opens the market for small businesses like restaurants, barber shops, and boutiques. Bowling Green Bowling Green State University promises an endless flow of college students seeking out their first apartment, promising a tidy rental income for those looking to become landlords or storefront owners. Rents for apartments are about $950, while commercial real estate rental income averages between $10 and $12 per square foot. SanduskySandusky is home to the world-famous Cedar Point, a very popular theme park, and there's a constant need for more vacation rentals near this attraction. In addition, its downtown is quickly revitalizing, making it a great opportunity for those wishing to rent a storefront or open a business here. |
Perhaps the most famous of Ohio's regions, Northeast Ohio is home to Cleveland; however, it also boasts a number of well-heeled suburbs and institutes of higher learning. Rental income varies greatly throughout the region, and property taxes are relatively high, but the income potential is still enormous despite this.
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ClevelandAverage rents for an apartment in the city property range between $960 and $2,137, making it one of the priciest areas in the region. It has also gone through a strong urban renewal that makes it rife with the possibility of commercial ventures. Shaker Heights
This is one of the most expensive suburbs of Cleveland, with an average rent of $1,500. It also has several separate shopping districts within its bounds, meaning you can easily find a great business opportunity here: each property makes about $17.64 per square foot. Kent
Home to Kent State University, rental property here can make up to $1,300 per month, while there are excellent prospects in its large and spacious downtown. |
Central Ohio is known for Columbus, the state's capital, which is one of the most expensive areas in the region. This means that property values are higher, but it also means that, with its skyrocketing population, you can be assured a great return on your investment property with DSCR loans.
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ColumbusIn the fastest-growing real estate market in Ohio, the average residential rental property makes $1,180 per month; a commercial property's cash flow can be as much as an eye-popping $26.28 per square foot, making opening a business here very attractive indeed. DublinAnother very expensive region, Dublin commercial rental property generates about $26.21 per square foot, while average residential rents are about $1,450. DelawareThough not as pricey as its neighbor, Dublin residential rents are a reasonable $1,271; like other areas in Central Ohio, you can expect a very good return on investment for commercial space, boasting an impressive $25.63 per square foot. |
Home to Cincinnati, the theme park Kings Island, and the world-famous Cincinnati Zoo, there is a lot of potential in this area of Ohio, making it a great place for both commercial and residential real estate investors.
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CincinnatiA commercial property's cash flow here will be about $17.80 per square foot; meanwhile, the average monthly rent is $1,050, a 5% increase from previous years and still rising. DaytonDayton, famous for aeronautics, has a relatively low commercial rent of $15.24 per square foot, and apartments have a going rate of $1,007 a month. This makes it a great opportunity for smaller businesses hoping to corner the market in their specific niche. West ChesterIn contrast to Dayton, tony West Chester has average rents between $944 and $1,254; its commercial spaces are also more expensive, at about $17.25 per square foot. |
Laid-back Southeast Ohio is mostly known for its abundant parks and natural resources, making it an excellent option for those who would like to open boutiques and vacation rentals around Hocking Hills State Park. However, it's also growing in industry, drawing more workers to the region.
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ChillicotheWhile a relatively small town of only 21,000, home rental income varies between $800 and $1,200, and commercial real estate investors can expect to make about $18 per square foot. LoganLovely Logan, home of Hocking Hills State Park, boasts excellent rates for vacation rental properties: some net as much as $400 a night. While its commercial rental income is low, this may rise as Hocking Hills grows in popularity. WaverlyWaverly is very rural, and you'll be mostly looking at farmland, which averages about $7,763 per acre. As of now, residential real estate investors have a clear advantage. Rents here are around $736 per month. |
One of the best DSCR lenders in Ohio, we pride ourselves on transparency, honesty, and excellent rates. You don't need to prove DTI or provide tax returns: we focus on the property's net operating income and your creditworthiness.
We encourage you to contact us about our many options and learn more about our gold-standard processes that make accessing DSCR loans a breeze.
Check out some of Visio Lending's recently closed DSCR loans in Ohio.
Columbus, OH
Youngstown, OH
Columbus, OH
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Visio Lending is the nation's premier lender for buy and hold investors offering, long-term loans for SFR rental properties, including vacation rentals.
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