Hard Money vs DSCR Loan: Acquire With One, Hold With the Other
A debt service coverage ratio loan qualifies on the property's rental income rather than your personal income. It is a long-term hold loan. Hard money is a short-term acquisition and renovation loan.
The classic sequence is buy and renovate with hard money, rent the property, then refinance into a DSCR loan at the higher stabilized value.
| Factor | Hard Money | DSCR Loan |
|---|---|---|
| Purpose | Acquire, renovate, bridge | Long-term hold |
| Qualification | Property and exit | Rent covers the payment |
| Condition | Any | Rent-ready |
| Rate | About 12% per year (1% per month) | Roughly 7% to 9% per year |
| Term | 6 to 24 months | 30 years |
| Close | Days | 3 to 5 weeks |
| Rehab funding | Yes | No |
Choose hard money when
- The property needs work
- You must close fast
- Rents are not yet in place
Choose dscr loan when
- The property is rented
- You want a 30-year term
- The rent covers the payment with margin
Our verdict
Use hard money to get the property rent-ready and use DSCR to hold it. A DSCR refinance is the most common exit for our rental investors.