A diversified investment portfolio is a healthy one, so many investors have found themselves searching beyond the more well-known markets for promising rental properties - and many have found themselves curious about South Carolina, home to many highly underappreciated investment opportunities.
While the entire US economy is expected to slide into recession in 2023, South Carolina is doing better than most states on nearly every metric, including employment and economic growth. The state has sprung back from the Covid-19 pandemic by recovering all jobs lost in 2020, and economic diversification will prove to be a huge boon for the region.
South Carolina's unemployment rate is lower than the national average, while its tourism sector has rebounded significantly; only manufacturing regions tend to trail behind, but an incredible $11 billion in private sector investments to boost clean energy generation has helped to dramatically uplift its productivity.
The state's population growth is unprecedented: it's the third-fastest growing state in the nation, adding 89,368 more residents in 2022. Most of these new residents come from neighboring states, looking for the relaxed lifestyle that South Carolina promises and its birth rate is slightly higher than the US average; these young families need places to live, which is part of the reason that the housing market is quite tight in the state.
Ranked among the top ten housing markets in the nation, South Carolina's prices rose by a shocking 19.2% over the past year, meaning it's number two for increases. Incredibly low inventory and rising costs mean that rental properties have become an attractive option for South Carolinians, which suggests excellent potential rental income for investors.
One of the reasons that real estate investors love DSCR loans is because they can be obtained under a corporate name - which is great news for those looking to buy investment properties in South Carolina, which has excellent corporate tax breaks. Many companies in the Palmetto State can obtain a Corporate Tax Credit, eliminating 50% of their corporate tax liabilities for a certain number of years. Add this to their low income tax rate, and you have a golden opportunity to buy rental properties with a DSCR loan.
DSCR loans require slightly different information than traditional mortgages, so it's important to understand how securing financing works for a DSCR loan.
While a DSCR loan doesn't require you to provide personal income information, you will need to prove your creditworthiness. The minimum credit score in South Carolina specifically is around 640, but you should strive for a 680 or higher, as this will provide you with more competitive interest rates.
To calculate DSCR, you divide the property's income by PITIA (principal and interest payments, taxes, insurance, and association dues), which is the total debt service. The minimum DSCR ratio is typically 1.2, but most DSCR lenders prefer a DSCR ratio of 1.25 or more.
Most DSCR lenders require that you submit an appraisal of the property to ensure that its value matches the loan amounts requested. You will also need to prove the property's ability to generate sufficient cash flow through a rent schedule, which verifies the fair market rental income that can be expected. If your rental property has a tenant history, you'll provide previous lease agreements that can show the gross rental income.
For DSCR mortgage loans, you'll need a maximum Loan-to-Value Ratio of 80%, though most DSCR lenders prefer 75%. This will also identify what percentage you'll need to provide as a down payment.
Once you have received loan approval, you'll provide a down payment of at least 20%, but typically 25%. You will also pay closing costs at this time.
Lenders who offer DSCR loans will impose a prepayment penalty if you make loan payments ahead of time, usually on a "step down" schedule of percentages based on the date of loan approval; for example, if you pay your mortgage loan off in the first year, you'll have a 5% prepayment penalty.
When it comes to building your real estate portfolio, the entire Palmetto State is incredibly promising, but these are some of the best markets for investment properties based on expected rental income, economic growth, and rental rates.
One of the largest cities in South Carolina, Charleston has a fun vibe that's popular with both tourists and residents alike. It's quite pricey to buy property here, with average home values being around $519,979. Across all residential property types, rental income is about $1,737. Office space is relatively affordable at $28 per square foot, but a retail property's income is truly phenomenal at $39.43 per square foot.
The state capital Columbia is home to the largest US Army installation for combat training, meaning there is a large population of young families looking for dining and entertainment. Despite rental income being relatively competitive compared to Charleston at an average of $1,525 across all types, home values are much lower: single-family houses cost just $258,063. Commercial space is quite affordable at an average of $19.75 per square foot for both retail and office.
Greenville is a college town with truly beautiful waterfalls and parks that bring in locals and tourists alike. It's slightly more expensive than Columbia, with an average property value of $296,038, but rental income is also higher at an average of $1,750 across all residential home types. Retail and office rental properties make about the same, averaging $25.14 per square foot between them.
If you're looking at short-term rental properties, Myrtle Beach is your best bet: vacation house rental property can bring in an amazing $461 per night, despite the house value being only a bit above Greenville at $302,303. Long-term rentals provide approximately $1,900 per month, while retail space makes $18.08 per square foot.
Because you can secure financing based on the property's income rather than your personal income, a DSCR loan is a winning choice for real estate investors - and Visio Lending strives to provide the best loan experience on the market. Our DSCR mortgage program includes a straightforward application process, competitive interest rates, and a reasonable monthly payment. All we require from you is a credit score: no pay stubs, tax returns, or annual debt statements.
If you're ready to generate greater cash flow from your real estate portfolio, get in touch with us to learn how DSCR mortgage loans in South Carolina can make your financial goals a reality.
Check out some of Visio Lending's recently closed DSCR loans in South Carolina.
Myrtle Beach, SC
Columbia, SC
Charleston, SC
-1.png?width=300&height=329&name=DSCR%20Landing%20Page%20bottom%20grpahic%20(35)-1.png)
Visio Lending is the nation's premier lender for buy and hold investors offering, long-term loans for SFR rental properties, including vacation rentals.