Grow your real estate investing business with the most competitive and transparent private lender for bridge loans (hard money, fix & flip, rehab, ground up construction), DSCR rental loans.

Private Lender for DSCR Loans and Fix & Flip Loans | OfferMarket

Private Lender for DSCR Loans and Fix & Flip Loans

#### What is real estate equity?

 

Real estate equity is the ownership interest in a property. Typically, a property is purchased with a mortgage loan at a specified loan-to-value ratio ([LTV](https://www.offermarket.us/real-estate-glossary/ltv)). 

 

#### How to calculate real estate equity?

 

Equity = Market Value - Loan Value

 

For example, if you own a property that, based on [comps](https://www.offermarket.us/real-estate-glossary/comps) or an [appraisal](https://www.offermarket.us/real-estate-glossary/appraisal) is worth $100,000, but you have a $75,000 mortgage loan, then your equity is $25,000.

 

$25,000 = $100,000 - $75,000

Equity in real estate is ownership in a property. Equity is the value that is left to the owner once liabilities are subtracted or paid off. Learn more about equity at OfferMarket.

large_Equity - Real Estate Glossary - MetaImage.jpg

medium_Equity - Real Estate Glossary - MetaImage.jpg

small_Equity - Real Estate Glossary - MetaImage.jpg

thumbnail_Equity - Real Estate Glossary - MetaImage.jpg

Equity - Real Estate Glossary - MetaImage.jpg

Equity - Real Estate Glossary - OfferMarket

What is Equity in real estate?

### What does AVM mean?

 

AVM stands for Automated Valuation Model. An AVM is a pricing algorithm (computer program) used by acquisitions departments at real estate investment firms and [iBuyers](https://www.offermarket.us/real-estate-glossary/ibuying) including [Opendoor](https://www.offermarket.us/blog/opendoor-competitors), [Offerpad](https://www.offermarket.us/blog/offerpad-competitors), [Zillow Offers](https://www.offermarket.us/blog/zillow-offers-competitors) and [RedfinNow](https://www.offermarket.us/blog/redfinnow-competitors) to determine how much to offer for a given single family home.

 

AVMs are proprietary in nature, meaning they are unique to each iBuyer (think secret sauce). AVMs factor in sales data, economic data, demographic data, renovation and [ARV](https://www.offermarket.us/real-estate-glossary/arv-after-repair-value) assumptions in order to provide an attractive cash offer to sellers. 

 

If an AVM is not accurate, it can result in significant losses for the iBuyer -- this is likely the reason why Zillow paused their iBuying service in Q4 2021. For this reason, it is prudent to apply a layer of disciplined human analysis to refine and train AVM output.

AVM stands for Automated Valuation Model, a proprietary algorithm used by iBuyers such as Offerpad, Opendoor, Zillow Offers and RedfinNow.

large_AVM - Automated Valuation Model - Real Estate Glossary.jpg

medium_AVM - Automated Valuation Model - Real Estate Glossary.jpg

small_AVM - Automated Valuation Model - Real Estate Glossary.jpg

thumbnail_AVM - Automated Valuation Model - Real Estate Glossary.jpg

AVM - Automated Valuation Model - Real Estate Glossary.jpg

AVM means Automated Valuation Model - OfferMarket Real Estate Glossary

What is AVM in real estate?

## What is an iBuyer?

 

iBuying means "instant buying" and is a type of home sale transaction where the iBuyer (see list of well-known iBuyers below) provides a real cash offer and closes in as little as 7 days or with some flexibility on your timeline. The iBuyer then sells your home for a higher price either through the [MLS](https://www.offermarket.us/real-estate-glossary/multiple-listing-service) or to institutional rental property investors.

 

While selling your home to an iBuyer is convenient and easy, you will most certainly leave money on the table compared to a true marketplace transaction. iBuyers provide below market offers and charge a service fee which is used to cover transaction costs and repairs. If you sell your house to an iBuyer, you should expect to receive as much 10% - 15% below the net proceeds you would otherwise receive on a competitive marketplace.

 

### iBuyer Competitors

 

- [RedfinNow](https://www.offermarket.us/blog/redfinnow-competitors)
- [Opendoor](https://www.offermarket.us/blog/opendoor-competitors)
- [Offerpad](https://www.offermarket.us/blog/offerpad-competitors)
- [Zillow Offers - Program Shut Down in 2021](https://www.offermarket.us/blog/zillow-offers-competitors)

 

OfferMarket is a ZERO commission marketplace and iBuyer alternative for sellers who want to compare multiple offers from verified cash buyers and sell fast and conveniently for higher net proceeds.

 

### Related reading:

 

 

- [RedfinNow Competitors](https://www.offermarket.us/blog/redfinnow-competitors)
- [Opendoor Competitors](https://www.offermarket.us/blog/opendoor-competitors)
- [Offerpad Competitors](https://www.offermarket.us/blog/offerpad-competitors)
- [Zillow Offers Competitors](https://www.offermarket.us/blog/zillow-offers-competitors)
- [Selling A House AS IS](https://www.offermarket.us/guides/selling-a-house-as-is)
- [Sell My House Fast](https://www.offermarket.us/blog/sell-my-house-fast-day)

iBuying is short for "instant buying" and is a term used in the real estate industry for fast cash offers for your house.

large_iBuying - Glossary - MetaImage (1).jpg

medium_iBuying - Glossary - MetaImage (1).jpg

small_iBuying - Glossary - MetaImage (1).jpg

thumbnail_iBuying - Glossary - MetaImage (1).jpg

iBuying - Glossary - MetaImage (1).jpg

iBuying - Definition - Real Estate Glossary - OfferMarket

What is iBuying in real estate?

## What does DSCR mean?

 

**DSCR** means *Debt Service Coverage Ratio*. DSCR is a ratio calculated by taking a rental property's operating income and dividing it by the cost of a loan. DSCR is a metric private lenders and commercial lenders use to determine the amount of a loan they are willing to provide for a single family or multi-family rental property.

 

## How do you calculate debt service coverage ratio?

 

Use our handy [DSCR Calculator](https://www.offermarket.us/tools/dscr-calculator) to quickly and accurately determine DSCR and maximum loan amount!

 

## Method 1: Net Operating Income ÷ Debt Service

 

### Key:

 

**Net Operating Income ("NOI")** = Rent Revenue - Taxes - Insurance - HOA Dues - Maintenance - Property Management

 

Debt Service = Mortgage Principal + Mortgage Interest

 

A DSCR of 1.0 means the property generates exactly net operating income to cover the cost of mortgage payments. 

 

## Method 2: Adjusted NOI ÷ PITIA

 

**Adjusted NOI**: Rent - Maintenance - Utilities - Property Management 

 

**PITIA**: Mortgage Principal + Mortgage Interest + Taxes + Insurance + HOA Dues

 

This second method tends to result in slightly lower DSCR, so it's important to understand how your private lender calculates DSCR.

 

## DSCR Example

 

Let's say you own a rental property that generates $30,000 in NOI and the monthly mortgage payments (principal and interest) are $2,000 or $24,000 annually. That means the property has a DSCR of 1.25.

 

## What debt service coverage ratio do private lenders require?

 

Private lenders typically require a DSCR of 1.2 or higher to make sure the income generated by the property can conservatively repay the loan. 

 

## How does DSCR relate to LTV?

 

DSCR varies based on the target [LTV (loan-to-value)](https://www.offermarket.us/real-estate-glossary/ltv) because the amount of the loan impacts the debt service component of the ratio.

 

## Learn about Private Lenders

 

Read [The Ultimate Guide To Real Estate Private Lenders](https://www.offermarket.us/blog/real-estate-private-lenders) to learn everything there is to know about working with private lenders to grow your real estate investing business.

 

## Looking for a Private Lender for Bridge Loans and DSCR Rental Loans?

 

 Get approved by [OfferMarket Capital](https://www.offermarket.us/capital), our private lending division.

Debt Service Coverage Ratio ("DSCR") = NOI ÷ (Mortgage + Taxes + Insurance). Learn how to calculate  DSCR.

large_DSCR - Glossary - MetaImage.jpg

medium_DSCR - Glossary - MetaImage.jpg

small_DSCR - Glossary - MetaImage.jpg

thumbnail_DSCR - Glossary - MetaImage.jpg

DSCR - Glossary - MetaImage.jpg

Debt Service Coverage Ratio (DSCR) - OfferMarket

What is Debt Service Coverage Ratio ("DSCR") in real estate?

Revenue - Operating Expenses

 

Net Operating Income is used to calculate capitalization rate ("cap rate"), a fundamental quantitative valuation metric for real estate investing.

 

Depending on the type of real estate, revenue can include: 

 

- Rental revenue
- Service fees
- Parking revenue
- Vending machine revenue

 

Operating expenses include:

 

- property management
- vacancy
- uncollectible rent revenue
- insurance
- property taxes
- maintenance

Net Operating Income ("NOI") = Revenue - Operating Expenses. Learn how to calculate NOI.