DSCR Loans for Real Estate Investors Explained – Financing Made Simple

Gavin P Fisher (00:00)
So I try to open myself up. It’s okay. You’re new to this. When I had a couple of houses and what I’ve seen my clients do, how do I provide the right advice? What did I get myself into? What they get themselves into. I think starting out small, especially if you want to be a long-term hold, starting out with one and seeing if you really want to become a landlord long time or as you grow, will you want to put in place a management company, whether you start your own management company and hire somebody to do it or do you find a management company out there that exists that has good reputation in your market and hire them. If you want to be a landlord, let’s slow roll into it because the last thing you want to do is buy 10 houses and be a landlord and get three calls at 3 a.m. and you’re getting out of bed going to change toilets or fix electricity, right? That’s the last thing you want to do.

Dylan Silver (02:19)
Folks, welcome back to the show. Today’s guest is a lender based in Indianapolis with a banking background who helps clients navigate their financing needs with expertise and strategy. Please welcome Gavin Fisher. Gavin, welcome to the show.

Gavin P Fisher (02:36)
Thank you very much Dylan, excited to be here. Appreciate you having me on today.

Dylan Silver (02:40)
I always like to start off at the top by asking folks how they got into the real estate space.

Gavin P Fisher (02:47)
Yes, great question. So for me, it’s kind of been a roundabout journey. As you mentioned, I’ve had a banking background and when I first got into banking, I had some clients that were in real estate, owned a bunch of properties, had them as long-term rentals. And I became more intrigued as to, never heard of this, doesn’t really make sense, so let’s learn more. So I started asking more and more questions, found out that it’s a great space and that…

Obviously real estate is a good asset to have and if got people paying you to live in your own house and it makes sense and you’re making money and you’re gaining value. So over time, I never thought I would necessarily be the owner of some real estate, but my wife and I did end up having a couple of rentals ourselves that we sold maybe eight to 10 years ago and we’re out of the game. But I always liked the idea of helping people live that dream and saying, okay, I’ve got a house that needs fixed up. I want to fix and flip it or I want to buy it and it long-term. How do I help them? How do I come in? Of course.

being with the banking, the finance background, it’s the money side of it. So how can I help those people buy those properties?

Dylan Silver (03:45)
I want to ask you about the lending space. There seems to be so many different ⁓ niches within lending and coming from the distressed real estate side, dealing with lot of investors, distressed properties, I’m familiar with hard money lending. But now because of different market pressures and working with more investors, I’m familiar with DSCR loans. But then as a realtor, I’m also familiar, of course, with the traditional side of things. Are there…

Now more niches than ever in the lending space.

Gavin P Fisher (04:17)
Absolutely. There’s a flavor for everybody out there, right? You go to your local ice cream shop, they got 20, 30 flavors. It’s kind of how real estate lending is these days. And the goal, if you are the investor, trying to buy that property is to figure out which.

true lending niche you fit into. And it’s not always easy because right in our head we say, hey, we need this style loan. And then if you go that right, that route, excuse me, might figure out, shoot, I should have done something totally different, but now you’re too far down the path. So yes, there is a flavor for everybody out there, no matter what you’re looking for, fix and flip, DSCR, bridge loans, you name it, it’s there, and it is hard to navigate and also where to go.

Dylan Silver (04:57)
I want to ask you about going from banking to lending. think that this is really a great transition. think I’m maybe selfishly because I work with so many investors that I wish more people in banking maybe did this because I hate to say it Gavin because I don’t want to make it sound like I’m ⁓ complaining. I don’t like that. But when I was working with some investors you would get these these

approvals what looked like and then the day before closing the lender would say well we need this we need this and so I’ve said this before in the podcast it got to a point where I was like okay we need to I need to vet these lenders before I just accept this approval or my my investor telling me that hey we’re good to go we’re good to go so I started saying no I need to talk with your lender I need to have a conversation with them because I need to know that

we’re not gonna have something come up the day before closing.

Gavin P Fisher (06:39)
Yes, I wish I had a magic wand and I could tell you exactly how to get by all that that does still seem to come up quite a bit The thought process is and when you’re out there trying to find somebody to help you is you get a lot of clarity up front Like you said, I want to talk to the exact person. Hopefully you can get all the clarity Here’s how the process is going to work. You’re gonna need these documents today these documents

you know, two weeks, we’ll get an appraisal back, then we’re going to need three, four more things. Inevitably, in lending, with my banking background, whether it was a simple car loan to now doing this, something always comes up at the end. And if you’re working with the right partner, it should be getting mitigated pretty quick or maybe a solution is put in place. If you need something and you don’t quite have it, hopefully there’s a quick workaround and you know that in advance.

Dylan Silver (07:26)
I think it’s interesting. I don’t know if I mentioned to this to you before hopping on the podcast here. I came from the automotive industry. So I worked for Nissan for a handful of years. I worked for Stellantis for a handful of years. And so of course that’s totally different asset. We’re talking about cars that the appreciate versus houses that appreciate in real estate that appreciates. And I think one of the interesting things and why I love real estate, why I’m passionate about it, even if there was the money aside, right, is the idea that you can purchase something

that holds value and appreciates with time, it does not depreciate in the US we’re talking, right? Versus you go and it really unfortunately doesn’t matter what car you buy, it feels like five years later it’s worth less than 50 % in most cases. And so I’m curious to get your perspective when you’re dealing with newer investors and they’re asking you maybe questions about hey, what should I get? Should I get a duplex? Should I get single family?

Should I get a bunch of units? Because maybe it’s safer for me to start with a bunch of units. What advice do you have folks who may be starting out and looking at their first asset to get into?

Gavin P Fisher (08:31)
Yes, good. No, that’s great. And there’s a lot of advice out there. So first I’d say find find somebody that you trust, whether it’s me or Dylan, maybe they call you directly, right? Find somebody you trust to give you the advice because everybody’s got an opinion, but everybody’s opinion falls to the way they look at things.

So I try to open myself up. It’s okay. You’re new to this. When I had a couple of houses and what I’ve seen my clients do, how do I provide the right advice? What did I get myself into? What they get themselves into?

I think starting out small, especially if you want to be a long-term hold, starting out with one and seeing if you really want to become a landlord long time or as you grow, will you want to put in place a management company, whether you start your own management company and hire somebody to do it or do you find a management company out there that exists that has good reputation in your market and hire them. If you want to be a landlord, let’s slow roll into it because the last thing you want to do is buy 10 houses and be a landlord and get three calls at 3 a.m. and you’re getting out of bed.

going to change toilets or fix electricity, right? That’s the last thing you want to do.

Then if we look at the flicks and fix and flips side of things, it’s okay. Your first one is where you’re learn. You’re probably gonna lose money. You’ve never done it before. So if you’re trying to do it all by yourself without bringing in some experts or people that know a little bit more than you, you’re probably gonna lose money. You said your budget was 30 grand and it’ll be in 50. You bought the house at 75. You thought even the appraiser said it’d be 200 when you finished. But then you cut corners because you realized the budget was out of whack and now that 200 is really 175.

Right, you just take that on the chin up front and say, I’m probably going to lose some money on this, but that’s okay. I’ve learned the ropes. I found some good partners. Flip two, three, four, five and a hundred. Now I’m going to make a lot of money on it. And I think the reputation or what we see on social media is, oh, I bought this distressed house and I made a hundred thousand dollars. Sometimes it happens and sometimes it doesn’t. So we hopefully are realistic going into it.

Dylan Silver (11:07)
I want to ask you about your niche within the lending space. Is there a specific niche that you’re most enthusiastic about or where you see a lot of clients coming from or where you really feel like, this is what I’m going to specialize in?

Gavin P Fisher (11:22)
Yes, ⁓ I’ll say it’s easier on…

my end of things for lending space to do one to four units, right? Single family style because there’s less involved and expenses are typically less in the one to four family. So I really like working in that space because I feel like things move faster. When you get into the five units and up, right? It falls into commercial buildings, commercial lending and a little bit more rules come into play. Appraisals typically are going to be more expensive just because now it’s deemed commercial versus residential, but four units to six units really isn’t a difference, right?

happens to be on paper. So I really like the single family one to four. Like I said, I think it’s easier and it’s easier to help guys, especially new investors through that space. But I do feel that.

A 10, 20 unit is a good size for folks when it comes to apartment building, small apartments. It’s great. Good cashflow can be there if you do the property right. If you buy it right, put the right rents in, get it up to a point where it’s stable and then try to get out of it. That’s the goal. So that 10 to 20 units is a good spot for me. And then the one to four is another good spot.

Dylan Silver (12:14)
Yeah.

want to pivot a bit here Gavin and ask you maybe a regional question about real estate out there in Indianapolis. I am licensed in Texas. I lived in San Antonio in Dallas, Texas. I’m familiar with some of the other markets. I know very little about Indianapolis. Is it very investor heavy right there? Is the city expanding? What’s it like out there?

Gavin P Fisher (12:52)
Yeah, that’s awesome. So it is. It’s very investor friendly.

The values of the homes, kind of as you mentioned at the top of show here, don’t really sway too much. It is truly an asset that’s going to go up. We look back to 2008 when we had the boom in places like Florida and New York, California were getting hit hard. Not that Indianapolis saw sore in real estate, but the values didn’t drop in Indianapolis and the surrounding counties like they did across the country. And so it’s fun when we talk to other lending partners out there that are going to help us do how.

We’re

a little nervous about this or that and then it’s coming back to coach from hey We’re in the Midwest Indianapolis is always pretty stable We see a constant one to three percent increase in value of a home even in bad times So things are good here and we’re driving industry I say we like I’ve got anything to do with it But but the the folks in those power positions in the state are truly trying to drive industry to the area and that’s really helping

with bringing more people into work, live, so on and so forth to have these rents continue to rise, which is nice.

Dylan Silver (14:01)
want to ask you about how you’ve seen the business change over time. I know I got in in 2023 and I’ve seen there’s been change since 2023, let alone since 2020. And I think DSCR loans is one thing that I’ve seen with more and more popularity, especially working with investors. Have you seen any major trends or maybe things fade away since you got started at Lend?

Gavin P Fisher (15:08)
You hit the nail on the head. DSCR has taken off. I think it’s a great product. The coming from my banking background, which banks typically don’t like to do investment real estate, right? They prefer owner occupied. So small community banks will do investor real estate because they kind of get it.

but they still underwrite it as a, or they were underwriting as a true loan. We’re getting tax returns, we’re going through personal financial statement, how’s the individual’s true credit score and all those things to figure out if they can pay for the extra house without really considering if it’s rented or not, right? That’s how a bank typically looks at it. Now, fast forward to 2023 to 24, DSCR is getting hotter out there. Now some banks will have a DSCR division. So DSCR is really coming at it and…

lenders and general banks as well. They’re starting to look at these investment real estate people out there, these investors out there and these assets and say, wait, if you paying me a thousand dollars a month, but you got a $1,500 a month rent.

you should be approved for a loan because right the ratios, right? The 1500s covering a thousand. Okay, we’re, good. You know, give or take some other variables. And I think DSCR is fantastic. It really looks at the asset and what you’re doing as an investor versus who you are as an individual. mean, we, you know, no matter how much money you have or lack of money you have, maybe you’ve made a mistake in the past, but if you know how to run an asset and grow that asset, you should be able to get dollars. Same with the fix and flip side.

Dylan Silver (16:12)
Let’s figure out a way, yeah.

Gavin P Fisher (16:40)
Fixing flips a little trickier because you’ve got to have more experience, right? The first one’s always tough. Then the second, third, and fourth, you’re getting better. So the experience aside, that does weigh a little bit more on the individualized investor. Hey, if this thing truly loses money, is the bank or is the lender going to get paid back? Am I going get paid back if all of a sudden that value went from 200 to 175 and his budget was out of whack? That’s tough. But with the plethora of options out there to cover everybody.

Dylan Silver (17:08)
I want to ask you for folks on the other side who aren’t investors, maybe looking, you know, younger folks, college graduates, so on and so forth, who are looking, trying to get in their first home and maybe feel like, man, this is really hard. Am I going to be able to get into home? They’re looking at statistics and they’re seeing, you know, whatever percentage of people in their twenties and thirties are homeowners. And they may be thinking, well, maybe I should be looking at maybe an older home. Do I need to be looking at new builds or, Hey, I’ve heard maybe I need to be looking at a duplex.

What’s your advice to folks who are on the opposite side? They’re not investors, but they’re trying to get into their first property. Should they be looking at new builds?

Gavin P Fisher (17:45)
I think it depends on the market you’re in. I would say if you’re not an investor and don’t necessarily know what work, new builds are probably the best way to go because you’re going to have less headache or you got some warranties on things. Applied says maybe already have warranties. The build structure has warranties. So you have less risk as a new homeowner to get into it. The flip side of that says if you’ve got any type of creative bone in your body or

Hey, I like challenges. Yeah. Then buy something older and then fix it up and then decide, you know what? I really like this is my own home. I took pride in fixing it up, but shoot, I should go buy another one of these down the block because it looks ready. I want to fix it up as I live here now. And I want that next, my next door neighbor to look good. So let’s buy that house, fix it up and flip it or rent it out long-term. ⁓ one other thing, the, the home hack you mentioned, twoplexes for those who are

Wanting to buy a first home, not sure affordability or if they want it. If you can buy a duplex and have a tenant on the other side that can cover the whole mortgage, mean, that’s a win, win, right? So if you go to get financed and your mortgage, once again, is a thousand dollars for the whole duplex and you got somebody paying you a thousand dollars, boom, you’re offsetting your own mortgage and kind of living for free. So for those new home buyers out there, think about a duplex and having one side to be a tenant. And then you kind of live for free, which isn’t a bad way to go.

Dylan Silver (19:10)
I want to ask you a granular question, Gavin. Maybe I’ve said this, give away some of the gold, but not the whole bar. If someone is in that position, they’re not an investor, maybe first time home buyer, maybe ⁓ they really don’t know how to go about the process and they’re overwhelmed, right? And they’re thinking, well, what’s gonna be the path forward of least obstacles, the easiest path forward as a lender? it?

Gavin P Fisher (19:13)
Mm-hmm.

Dylan Silver (19:37)
Is it very much regional? Are lenders going to tell you different things regionally new bill versus, you know, older home versus duplex, or are there kind of some general guidelines that you would give folks as a lender?

Gavin P Fisher (19:51)
It could be could be regionally. I would hope it’s more across the board with with the answer. But obviously regions have to come into play because you got to help people find the right pocket that fits fits their needs within neighborhood or the city, what have you. But I would say first time home buyers ⁓ just like investors, the first time you buy a house, you want it to be as perfect as possible. So you buy it thinking it’s perfect.

You come out and it’s not going to be perfect. You’re to get in there, your HVAC is going to break within the first three months and you bought the thing in July, you’re hosed over, right? So you got to kind of know going into it that I need some cushion or I want to truly work with a relitter to buy this property right knowing that my inspection came back and said the HVAC is 15 years old or the roof hasn’t been repaired in a little bit.

and you’re so excited, it doesn’t matter. You’re gonna buy the house no matter what, it’s my first house, or maybe you just got married and you’re spouse is like, hey, we’re doing this together, this is what we want. But take note of the inspection and say, what’s that inspection come back and say, and what’s that mean? And hopefully your realtor is gonna say, hey.

It probably means in five more years, HVAC is going to go out. It’s going to cost you $10,000. So be prepared for that. Hey, the roof is bad. Hopefully you get another big hail storm coming through here in another couple of months, and now your insurance will cover the roof or something. But that advice I think is, what folks buying a house for the first time need to, need to get. And the lender, all responsibility is lending is to say, Hey, this is what it’s going to be. But ask some of those questions. We should be asking this question, what did the inspection come back look like? Hey, the appraisal came back.

not as good as we thought even though covers the sales price. Do you really want this house or is there other houses on the market that you should go look? At the end of the day, you gotta be happy with the house. New builds, kinda like a brand new car, it’s gonna come with a better warranty, right? So that the new houses come with…

Dylan Silver (21:52)
brain.

Gavin P Fisher (21:53)
better structure, better warranty to it. Older houses, you gotta go into it just knowing there’s probably gonna be a problem. And I’ll be honest, the first three houses my wife and I built within three to four months, we replaced the HVAC system, AC and furnace, the whole thing in three of our first houses. And it’s like never fails. Like, man, we can’t get a break. And that’s just how it worked. So we have bad luck on that. That’s why I brought that one up.

Dylan Silver (22:17)
You got

to definitely proceed with with caution and careful planning when you’re when you’re looking at anything, you know, pre owned in the real estate space. I want to ask you a follow up question. You mentioned a better warranty comparing it to the automotive space. New homes as a lender are lenders generally favorable towards new homes for first time home buyers or is that not the case and maybe a misnomer.

Gavin P Fisher (22:43)
that’s a good question. I’m not sure. I’m not sure that’s the case. From my perspective, I don’t look at it that way. I’m truly looking at, what can we afford? Does this make sense? How do we get in there? You know, can we buy it? Can we really appreciate this? If your area is building new, a lot of new, so right around Annapolis, there’s a lot of new builds. I would lead for a first time home buyer to go.

new reason i say that is even if you’re buying an older home

There’s more new construction, which means there’s more new growth. So where are we growing? And that’s probably an area to go be, especially as a younger person. I would say there’s more opportunity up there, not necessarily work wise, but your neighbors could fit in the same mold, right? Or if you plan on having a family, the family dynamic is a little better in those growing areas because that’s how those neighborhoods are scaled to. So I can’t say you don’t favor it as a lender per se, but I think the advice is to favor it from a

Dylan Silver (23:33)
Yeah.

Gavin P Fisher (23:44)
home respective. You get to pick some things you want, know, ground up construction or hey, it’s newer. Maybe you can still change some things in it versus the old home that you had to put more money into to change those cabinets to the right color.

Dylan Silver (23:57)
I think a lot of people will be interested to hear that, especially people who may be maybe just starting out and on the flip side of things with DSCR, there’s just probably so many more opportunities right now specifically. And then with we didn’t even get into like AI and the way that tech is influencing people to make decisions. But it seems like real estate is the first adopter in so many use cases for some of these things. But Gavin, we are coming up on time here.

Where can folks go if maybe they’re in the greater Indianapolis area and they have a deal that they’d like you to look at and see if they can get some lending on, or if they’d like to reach out to you and make contact with you?

Gavin P Fisher (24:38)
Sure, now thank you for asking and not only do we handle Indianapolis, we can handle outside of Indiana as well. So for those folks in some other states, maybe around the Midwest, Ohio, Michigan, Illinois, what have you, feel free to reach out as well. ⁓ Ramsheadfunding.com. That’s R-A-M-S.

funding.com is our website. So go reaches out there and you can reach out to me directly. My email is Gavin. That’s G A V I N at Ramshead funding.com. And our goal at what we do is to take an investor and mash them up with the right capital source. Marry that together. Get you your first house or your hundredth house. It doesn’t matter, but Ramshead funding.com and Gavin at Ramshead funding.com and we’ll help connect the dots and charge you forward.

Dylan Silver (25:23)
Gavin, thank you so much for coming on the show here today.

Gavin P Fisher (25:27)
Awesome Dylan, thank you very much for having me, I appreciate it. Look forward to helping all your listeners out there.