Couldn't agree more about the importance of detailed records. When I went through the DSCR loan process, my lender was initially skeptical about my property's fluctuating occupancy rates. Like you mentioned, seasonal swings can really throw them off. However, once I provided a clear breakdown of expenses alongside income—maintenance costs, utilities, cleaning fees, even occasional repairs—it painted a fuller picture of profitability. Lenders appreciate seeing that you've accounted for all variables, not just revenue streams.
One thing I'd add is that having a contingency fund set aside also reassured my lender. It showed them I was prepared for unexpected downturns or slow months. So yeah, thorough documentation is key, but demonstrating financial preparedness beyond just income records can make the approval process even smoother.
Totally makes sense to keep that contingency fund handy. Quick question though—how did you decide how much to set aside? I'm working on building up my own fund, and I've heard everything from 3 months of expenses to a full year's worth. Feels like a guessing game sometimes... Curious how you landed on your number, especially with seasonal ups and downs?
I've always been a bit skeptical about the standard "3-6 months" rule myself. In my experience, especially with seasonal fluctuations and market unpredictability, it pays to be cautious rather than sticking strictly to textbook advice. When I was figuring out my own contingency fund, I started by tracking my expenses closely for about a year, noting down peak and off-peak periods. Then I took the highest monthly expense figure and multiplied that by 6—felt safer to plan for worst-case scenarios rather than averages.
But honestly, even that approach feels a bit arbitrary at times. Markets shift, unexpected repairs pop up, tenants move out suddenly... there's always something. I'm curious though—have others here found that lenders have specific requirements or preferences regarding contingency funds when approving DSCR loans? Or is it more of a personal comfort level thing?
"Markets shift, unexpected repairs pop up, tenants move out suddenly... there's always something."
Couldn't agree more with this. When I first started out, I followed the textbook advice pretty closely and quickly realized it wasn't enough when my HVAC system decided to quit mid-summer—talk about timing. Lenders I've dealt with usually have their own minimums, but honestly, they're often lower than what I'd personally feel comfortable with. Curious if anyone's found lenders who actually factor in seasonal fluctuations or market volatility into their requirements?
I've noticed lenders rarely factor in seasonal swings or market volatility explicitly—at least not in their official guidelines. But I did have a client once who ran a vacation rental near a ski resort. Income was great in winter, but summers were dead quiet. When he applied for a DSCR loan, the lender initially balked at the uneven cash flow. After some back-and-forth, he ended up providing two years of monthly statements to show the predictable seasonal pattern. The lender eventually got comfortable with it, but it took some convincing.
Honestly, lenders tend to stick to their formulas because it's easier and safer for them. If your situation doesn't fit neatly into their spreadsheet, you might have to do some extra legwork to prove your case. Not ideal, but that's the reality of it...
