U.S. Investment Property Loans: A Foreigner’s Roadmap

Imagine the endless possibilities with real estate financing at your fingertips.The secret’s out, and you won’t want to miss out!

Many international investors have tried to secure investment property financing in the U.S., only to face rejection or get lost in the maze of bureaucracy. But it doesn’t have to be the same for you. There are options available that can help you expand your portfolio without the hassle and red tape that usually comes with the U.S. banking system. In our recent webinar, Waltz shared exactly how you and other foreign nationals can access investment property loans. Here’s the roadmap to make it happen. 

Expand your options beyond what you thought was possible

In the past, foreign real estate investors faced significant challenges when trying to acquire U.S. investment properties. Options were limited,making it difficult for foreign investors to capitalize on the opportunities that U.S.real estate offers. Facing barriers to entering the real estate market, international investors often had to choose between one of these underwhelming options:

• Give up and never get started: Many foreign investors simply give up on the idea of purchasing U.S. real estate. The complex regulatory environment, language barriers, and the lack of clear guidance, were enough to scare many away.
  
  
• Roll the dice with traditional banks: Those who refuse to give up go from bank to bank trying to qualify for a loan. Since every lender has different criteria for a mortgage, there are a variety of possible outcomes. While some will get turned away without proof of U.S. credit or U.S.-based income, others may get an investment property loan after months of endless paperwork and bureaucracy.
  
  
• Pay all-cash: Last year, 50% of international buyers pay cash for properties– not always because they wanted to. While paying all-cash can simplify the process and avoid the challenges of financing, it requires a substantial amount of liquid capital, which many foreign investors may not be willing or able to commit to a single property.

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• Leverage existing U.S. assets: Leveraging existing U.S. assets, like real estate, business interests, or stocks to secure financing can provide a solution. However, it limits flexibility and exposes investors to additional risks if those assets lose value or become tied up in the deal. And of course, those without existing assets don’t have the luxury of this option.

There’s another way to get a loan, though. Even if you don’t live in the United States, have a Social Security Number, or even U.S. credit. It’s called a DSCR loan and it simplifies the process for foreign investors.

DSCR loans remove financing barriers

DSCR stands for debt-service-coverage-ratio. As its name suggests, DSCR loans are based on an investment property’s ability to cover its own expenses and cash-flow. This is different from conventional loans in that your personal debt-to-income ratio is not the determining factor for getting a loan.

In short, a DSCR loan is particularly beneficial for international buyers focused on rental property investments. A key factor in determining eligibility is the DSCR calculation, which typically needs to be above 1. This loan type requires less individual documentation. The emphasis is placed on the LLC under which the property is purchased and the income the property generates, rather than your personal financial history.

DSCR loan requirements

To better understand how the DSCR loan works, it's important to know the key requirements for qualifying. Below are the key DSCR loan requirements that traditional lenders often use as well as Waltz’s requirements for international investors:

• Traditional lenders typically require a minimum FICO (U.S. credit) score of 620, whereas Waltz doesn’t require a FICO score at all for foreign nationals.
  
  
• U.S. residency or U.S.-based income is often required for traditional lenders. Waltz doesn't have that requirement as we specialize in working with foreign nationals.
  
  
• The down payment for traditional lenders is usually higher, ranging from 30-40%, while Waltz typically requires a lower down payment of 25-30%.
  
  
• Traditional lenders require U.S. income verification, but Waltz doesn’t need proof of U.S. income. This is for two reasons: the focus is on the investment property’s performance and because we have other means of verifying income outside of the U.S.
  
  
• Both traditional lenders and Waltz generally require a DSCR score greater than 1 to qualify. This varies by lender and property.
  
  
• Both options require ownership of a U.S. LLC or similar entity to handle the property purchase.
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Benefits of financing real estate rather than paying cash

DSCR loans enable foreign investors to finance rental properties. You might be wondering why some investors choose financing as opposed to paying cash. Based on investors we’ve helped, these are the top reasons for financing real estate:

New loans: DSCR financing creates 3x more leverage

Leverage is one of the greatest advantages of real estate over other asset classes. It means using borrowed money to invest more than you could with just your own cash. 

With DSCR financing, you can use leverage to spread your money across multiple properties. For example, Waltz offers financing at 70% Loan-to-Value (LTV). So instead of buying one property with cash, you could buy three properties using the same amount of money. This lets you grow your rental property portfolio faster over time.

Cash-out refinancing: use existing equity to scale 

Do you already own a property that you paid all-cash for or a rental property with significant equity?

You should know that DSCR loans have a cash-out refinancing option. This allows you to use the equity in your current properties to free up cash for new investments, meaning that you can grow your portfolio without needing to use additional money out of pocket. By leveraging the equity you’ve already built, you can acquire more properties, increase your rental income, and build wealth faster.

Steps to successfully close a deal with Waltz

DSCR loans make investment property financing possible; Waltz makes it simple and streamlined for rental property investors like you. Once you have a property in mind, here are the steps to get a DSCR loan with Waltz:
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1. Get a loan quote: Receive a quote tailored to your investment goals, so you can make informed decisions from the start.

2. Loan application and Investor Kit: If the quote looks good to you, complete your loan application. As part of this process, you'll need to provide information such as your LLC documents. Rest assured, Waltz can help you set this up in minutes with the purchase of our Investor Kit.

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With the Investor Kit, you’ll be able to do everything through one platform, saving you time and sparing you from the complexities of setting up a business. Quickly establish your LLC and EIN, ensuring your business is properly structured. You can also open a U.S. bank account for efficient transactions and transfers– including foreign exchange.

3. Track your purchase in real time: Stay updated every step of the way with real-time tracking of your application and purchase on the Waltz platform.

4. Get financing and close the deal: Finalize your loan and close on your property—typically in under a month. Enjoy the convenience of remote closings whenever possible, and rest assured that you’re in good hands with our team.

Explore DSCR loan options with Waltz!