How DSCR Loans Help Real Estate Investors Scale Without W-2s or Tax Returns

Fernando Corona (00:00)
I don’t think it needs your advantage. would say eventually,

when you go the conventional route, either one, you don’t have income,

or you don’t have income to be able to buy the properties you want to buy.

And so that’s where DSCR loan allows you to use like buy properties or refinance properties without your income. So that’s number one. But even if you do have income, eventually, let’s say you want to partner with people,

you want to raise capital, pull money together, and you want to partner with other people. Well, in the conventional world, it’s not like you can split up. ⁓

Like everybody has to be on the loan. Everybody’s credit has to be pulled.

Michelle Kesil (02:09)
everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil, and today I’m joined by someone I’m looking forward to chatting with, Fernando Corona of Remote Lender, who offers lending support for co-living investors. So excited to have you here today, Fernando.

Fernando Corona (02:30)
Yeah, thanks Michelle. I’m excited to be here.

Michelle Kesil (02:32)
Great, let’s dive in. So first off, for those not familiar with you and your work, can you share what your main focus is?

Fernando Corona (02:41)
Yeah, main focus is helping ⁓ investors specifically in co-living or using PadSplit income scale their portfolio. So we use primarily DSCR loans to do that.

Michelle Kesil (02:53)
Awesome, and can you explain a little bit more about ⁓ co-living and DSCR for those that might not be familiar?

Fernando Corona (03:01)
Definitely so pad split

just the idea that you can buy rental property, get a single lease on there like a single family, and cash flow, make money, pay your debts. I think that’s kind of going away, mainly that the value of homes are increasing faster than the rents are. And so a lot of investors have to find new ways of generating cash flow. Airbnb obviously came up and now kind of what’s picking up steam is this co-living concept where you

buy a four bedroom house or five bedroom house and you convert it into an eight bed or a ten bed property. And so the idea is if you could double or triple the income of the property, well then you generate more cash flow, you make more money, you can afford to buy real estate again. And that’s where they need financing to be able to do that. And that’s where we come in. DSCR loan stands for debt service coverage ratio, which all that means is if the

income of the property is equal to or greater than the debt of the property, which is the principal interest taxes and insurance. If that equals or it’s greater than, I don’t ask for W-2s, no tax returns, no pay subs, and we can give people money.

without having to ask for like conventional loans. They ask for personal documentation, personal income. In a DSCR loan, we don’t ask any of that income documentation.

Michelle Kesil (04:36)
Awesome. And are all of your investor clients in the co-living space?

Fernando Corona (04:45)
Yeah, I would say the majority of them are in the co-living space. ⁓ You know, we’ve generated, we’ve closed over 250 loans specifically for co-living and ⁓ pad split investors. So that’s what we’ve been looking up to.

Michelle Kesil (05:50)
Awesome. And like, how does that co-living work? people having to find all of the tenants or each room is kind of found individually?

Fernando Corona (06:06)
Yeah.

So would say that’s on the investor side. know, that’s where people have PadSplit, which is a platform like Airbnb, and they’re the ones that find tenants for you. But then there’s other people that are doing sober living, or they’re doing group homes, or they are going on Facebook, and they’re finding people on Facebook, or Craigslist, or Roomies, and then they’re filling them themselves, managing it themselves. So I think how investors do it is up to them. The less people involved in helping you, the more money you get to keep.

The more people you have helping you manage your money or your properties, then obviously the more that you have to give a cut of. So I think that’s up to each investor on how they want to weigh their options.

Michelle Kesil (06:51)
Yeah, that makes sense. And so what does the process look like when an investor comes to you? Like, what do you walk them through?

Fernando Corona (07:00)
Yeah, so an investor comes, usually I’m is the, do want to refi your purchase? What’s the scenario? And usually they say, Oh yeah, I got this deal. I want to buy it. And I say, okay, is it, um,

what’s the property type, single family home, duplex, triplex, fiveplex, what’s the purchase price? So I started collecting information to understand the scenario. And one of those questions is, is it an Airbnb or is it a co-living property or is this a regular property? And then based on the answer, then I start to ask more specific questions in the type of cashflow strategy they wanna use. And once we receive that information, it’s like a quote intake.

a quote intake form, then we start to talk strategy. Okay, how are going to buy these? Is the goal just to buy this one or are you looking to replenish and recycle your capital to buy others? Are there going to be partners involved? Are you going to raise capital? Are we going to close in an entity? So I just start to diagnose and analyze how they want to buy the property in that example. And based on what they answer, we provide, like we then connect them to the

right lending outlet to fund the deal because not every lender funds every deal so depending on what we bring in that’s at the right time we bring in the right lending solution.

Michelle Kesil (08:31)
And when you say you bring them the right lending solution, are you connecting people with different lenders or different options? What does that look like?

Fernando Corona (08:40)
Yeah.

Yeah, exactly. So we have different lender products that we have access to. And then depending on who like the problem we’re solving, we ended up connecting them to the right lender option. So we do have the in-house team that supports that. And then we’re just connecting, you know, the lenders that fund the deal. But so we’re a mortgage broker. So, yeah, we’re brokering the deal between the investor and the lender.

And then we’re usually, well the strong suit is that we’re packaging the loan up front to be able to submit to the lender in the way that it’ll be funded. And that’s our responsibility. Can we help out?

Michelle Kesil (09:24)
Awesome. And so when it comes to the DSCR loans, are there any people that it doesn’t work for or like what are the drawbacks?

Fernando Corona (10:07)
Yeah, the drawbacks, if you’re just getting started, you probably hear a lot about like 0 % down military VA loan, 3.5 % down FHA, 5 % down conventional. Like you hear these very low down payments. And so I think sometimes the scary part of a DSCR loan is the down payment is 20 % usually, 20 to 25.

And so if you’re just getting started, that can sound intimidating if you’re just getting into real estate. ⁓ But if you kind of understand, if you’re a little further along or do understand like this is how you can build a portfolio without having to use your personal income. It’s like I’ve gotten two of these myself and I didn’t have to show any tax returns, any income, I didn’t have a job at the time.

and was still able to get these loans on my properties. And I think when you understand it as a tool, it’s not something to be afraid of or intimidated by, but like, okay, how do I use this? How do I use this more? So that, I think that’s kind of something to share with everybody. Some other drawbacks might be that,

your LTV, so to my point, your LTV can’t be as high. So you have to put a, yeah, that’s an issue on a refinance. On a refinance, somebody might say, oh, how do I get 90 % out, or 85 % out, or even 80? And they might be having issues getting a higher loan to value than what they would want. So that’s something to be aware of. I would say those are probably the major drawbacks. Yeah, I don’t wanna get into too much technical details, but I would say those are probably major drawbacks if I had to think through.

Michelle Kesil (11:47)
Yeah. And so what are some of the ways that you support investors on their journey so they get the loan and then is there like another process that you continue as you work together?

Fernando Corona (12:05)
⁓ Repeat that one more time.

Michelle Kesil (12:08)
Yeah, is there like a way that you’re supporting investors maybe like once they get the loan? Is there a second step to that process?

Fernando Corona (12:19)
gotcha. I think that the goal is to try to figure out how do they want to grow their business. So for us, investors will eventually run into more problems. They run into credit problems. They run into raising capital problems, money problems, partner problems. So they run into insurance problems. They run into asset protection problems.

tax problems. So I think it’s more where we’re even though we don’t have all those ⁓ services.

part that we really bring value to is like, we know you’re going to need these other items. Like how can we support you? Like what else do you need help with? So we’re kind of having those conversations. And then because of my network, I can then connect them to the right people. Do they need attorney support, title support, insurance? Like there’s all these different people that I’m connected to. And I think that’s where we start to hand things off to other professionals so they can help the investor out in where they’re trying to be. And then on us, obviously we want the return business. So if they want to buy more properties or get referrals or

refinance

other properties as they build their portfolio, that’s what we’re here for.

Michelle Kesil (13:26)
And what are you most focused on solving or scaling to next?

Fernando Corona (13:32)
Yeah,

I live in California,

but I do a lot of loans outside of California.

I think the next piece is I want to do more loans for investors in California. And now that PadSplit or Co-Living, they actually just started coming into California, then I get to help a lot of investors here, which I’m looking forward to, because this is my backyard. But we land in 45 states, so yeah, we’re here to help.

Michelle Kesil (14:04)
and what have been some of the main keys that have allowed your business to grow and run successfully.

Fernando Corona (14:14)
yeah, to grow and run successfully.

I would say one of the key pieces is investing.

in myself, like reinvesting in myself, know, with coaching, support with masterminds. So I just continuously do that. And that’s exposed me to different networks, to different skills, different coaches. That’s been a huge one. And then reading, reading books has been a big one to know what positions of leverage I need to, you know, get to, to get to the next level. Those are probably the top two. And then just taking action. Like even, I guess, even though I get to connect with everybody, even though I read books,

if I’m not taking any action then I’m not making any progress and so I would say it’s just the amount of at this stage the amount of action that I’m willing to take while not knowing what the outcome is so action in the in the uncertainty has been a big one and so those are probably the top three

Michelle Kesil (15:52)
Absolutely. And are there other opportunities rather than the co-living that you see this loan being able to serve investors in?

Fernando Corona (16:06)
Yeah, mean DSCR loans

work for any

loan type or any property type I should say. Whether it’s a single family home, duplex, triplex, fourplex, tenplex, twentyplex, fiftyplex, like a DSCR loan is just a type of loan.

that uses the property’s income to help us buy it or help us refinance it. So if somebody’s not co-living your pad split and this is just a long-term rental or even if it’s Airbnb or they’re using BRBO or it’s a mixed-use property where they’ve got a restaurant in the bottom and they’ve got units in the top, DSCR loans can support all of that. Commercial properties, so that’s where, yeah, it’s really a flexible loan product.

but the guidelines would possibly change. So the way that a lender’s gonna underwrite a single family home is gonna be different than a fourplex, which is gonna be different than a 10plex and different than a mixed use restaurant with units. But the loan type is still the same. Make sense?

Michelle Kesil (17:07)
Yeah, absolutely. Yeah, yeah, go ahead.

Fernando Corona (17:12)
⁓ So, that’s it.

Michelle Kesil (17:14)
And so how can an investor use this to their advantage when they’re looking to scale and grow their business?

Fernando Corona (17:25)
Yeah, I don’t think it needs your advantage. would say eventually, when you go the conventional route, either one, you don’t have income,

or you don’t have income to be able to buy the properties you want to buy.

And so that’s where DSCR loan allows you to use like buy properties or refinance properties without your income. So that’s number one. But even if you do have income, eventually, let’s say you want to partner with people,

you want to raise capital, pull money together, and you want to partner with other people. Well, in the conventional world, it’s not like you can split up. ⁓

Like everybody has to be on the loan. Everybody’s credit has to be pulled.

You start running into all these issues where with the DSCR loan, if you close in an entity, we only need one person’s credit. So you could have two people that have money, bad credit, or you can have one person who’s a foreign national that lives outside of the country and you can use their capital and use the other person’s credit. That’s a, that’s something that we can do with the DSCR loan where in a conventional world, you can’t do that. So ultimately, as people start running into problems in the conventional world, they bleed over.

into the DSCR world because it’s the only way that it’s one of the only ways they can solve these problems right otherwise they can buy cash but we’re talking about when you’re getting financing ⁓

people run into the problem where in the conventional side, you cap out at 10 loans. Usually you can’t get more than 10 loans on your personal credit, conventional. And so if somebody’s scaling past 10 or they wanna refinance a pack of 10 or 15, we have some clients right now doing a pack of 10 loans with us. It’s really difficult to do that with in the conventional side at the same exact time.

versus DSCR, you can have as many DSCR loans as you want. So that’s really it. That’s where an investor can start to think, if I want to grow my portfolio, these are the problems I’m going to run into. Now I know how to solve them.

Michelle Kesil (19:24)
Absolutely. And are there any goals or opportunities that you’re excited about for your business?

Fernando Corona (19:34)
Yeah, and goals, would say, you know, one of our goals is to…

to get to being able to close 200 loans in a year. You know, I talked about over 250, close to 300 in three years. That was just when I started the business. But at this stage, if we want to be able to get to, can we help investors finance 200 loans in the course of a single year? That would be pretty awesome. It we’re doing a pretty good job. We’re having a pretty significant effect on…

supporting the investor community, which is what we want to do.

Michelle Kesil (20:16)
Awesome, thank you for sharing all of that.

Well, before we begin wrapping up here, if someone wants to reach out, connect, learn more, where can people find you?

Fernando Corona (20:30)
I would say [email protected] or on Instagram @ItsFernandoCorona. Those would be the two places to reach out.

Michelle Kesil (20:41)
Okay, perfect. Well, I appreciate your time and your story. Thank you so much for being here.

Fernando Corona (20:47)
Yeah, thanks Michelle.

Michelle Kesil (20:49)
course and from the listeners tuning in. If you got value make sure you have subscribed. We have more conversations with operators like Fernando who are building real businesses and we’ll see you on our next episode.