Learn how DSCR loans work and why they're easier to qualify for than traditional mortgages when buying investment properties. The Morbi Method shows you how to use debt service coverage ratio and loan-to-value ratios to finance real estate deals.
Please, Mr. Lender, I want this property so bad. I promise. I promise I can afford it and I promise I will pay the mortgage. Your debt to income is too high. I'm sorry, you can't afford this property. What the heck do you mean? I own four businesses and make a couple hundred thousand dollars a year. Yeah, I'm looking at your tax return and it says you don't make any money. Bro. Have you ever heard of depreciation? Come on. Yeah, I'm sorry. Wait, I need my glass alone. I just can't give you a loan. So if you've ever tried to buy real estate the normal way, it probably looks a lot like that. Enter in the Morbi Method strategy. It is an amazing wealth building tool and you're going to find out that it is going to be night and day for from the qualification process of what you're traditionally used to seeing, it's so much easier to get an investment loan in a DSER product. What is a Morbi Method? A Morbi method is when you are purchasing a property and you're doing it creatively and the end result is a mix between you getting a loan as you would traditionally and seller financing. So how that actually occurs is you have two transactions. You have transaction one where you are purchasing the property using a DSER loan. DSCR loan stands for debt service coverage ratio. Basically you are getting a loan based on the property performance itself. And what the lender is typically looking for is a DSER ratio above one. Now there are lenders that will go below one. But honestly you should probably slap yourself if you're buying a property with a DSCR ratio below one because that means you're losing money. So a one ratio means the rental income is at the same exact level as your piti. So you're breaking even. And the DSER doesn't include things that actually happen like property management, capex, lawn care, like any other things that come up right vacancies, it doesn't usually include that. So you really should be questioning yourself. If you're buying a property below a DSER of 1. Typically lenders want to see a DSER 1.2. The higher the number the better. That means that you have more income coming in than money coming out in your piti. So the greater that number, the better off you are and you are coming to close with those funds for the remaining amount of the purchase. So let's say you get a loan for 75% LTV. You or your partner has to bring that 25% plus closing cost.
