DSCR vs Hard Money Loans: Which is Better for California Investors?
California real estate investors often face a critical decision: DSCR loans or hard money loans? Both offer fast, flexible financing without traditional income verification, but they serve very different purposes. This comprehensive comparison helps you choose the right financing strategy for your investment goals, whether you're holding long-term rentals or flipping properties.
The Bottom Line Up Front
DSCR loans are ideal for buy-and-hold investors seeking long-term financing at reasonable rates. Hard money loans excel for fix-and-flip projects or bridge financing needs. Many successful investors use both strategically.
Head-to-Head Comparison
| Feature | DSCR Loans | Hard Money Loans |
|---|---|---|
| Interest Rates | 7.5-9.5% | 10-15% |
| Loan Terms | 30-year fixed | 6-24 months |
| Down Payment | 20-25% | 10-30% |
| Closing Speed | 21-30 days | 7-14 days |
| Credit Score Min | 620-660 | No minimum |
| Property Condition | Move-in ready | Any condition |
| Best For | Long-term rentals | Fix & flip, bridge |
Real Cost Comparison: $500K Property Example
DSCR Loan Scenario
Hard Money Scenario
Key Insight: While hard money costs more upfront, it can be profitable for flips completed in 6 months. For holds longer than 12 months, DSCR loans become significantly more cost-effective.
Common Questions: DSCR vs Hard Money
Can I refinance from hard money to DSCR?
Yes! This is a common strategy. Most DSCR lenders require 6 months seasoning and the property must be rented with sufficient cash flow. Plan your exit strategy before taking hard money to ensure you qualify for DSCR refinancing.
Which is easier to qualify for?
Hard money is easier to qualify for since it's asset-based with no credit requirements. DSCR loans require minimum 620-660 credit scores but don't verify income. Both are easier than conventional loans that require tax returns and debt-to-income ratios.
What if my flip takes longer than expected?
Most hard money lenders offer extensions for 1-3% additional points. However, costs add up quickly. If holding long-term becomes likely, start the DSCR refinance process early. Some lenders can close DSCR loans in 14-21 days for time-sensitive situations.
Can I get 100% financing with either option?
DSCR loans typically max out at 80% LTV (20% down). Some hard money lenders offer 100% of purchase price plus renovation costs, but require significant experience and strong credit. Cross-collateralization using other properties is sometimes an option for both.
Which option builds more wealth long-term?
DSCR loans build more wealth for buy-and-hold investors through appreciation, cash flow, and principal paydown. Hard money can generate quick profits but requires constant deal flow. Many successful investors use hard money profits to acquire DSCR-financed rentals for passive income.
Ready to Choose Your Financing Strategy?
Whether you need fast hard money for a flip or long-term DSCR financing for rentals, we have the right solution. Our team specializes in both loan types and can help you create a winning investment strategy.
We Offer Both Solutions
DSCR Loans
- • Rates from 7.5%
- • 30-year fixed terms
- • Close in 21 days
- • No income verification
Hard Money
- • Close in 7 days
- • Up to 90% financing
- • Fix & flip specialists
- • Flexible terms
Expert guidance • Multiple lenders • Best rates guaranteed