Delaware, known as America’s “First State,” earned its title as the first of the original 13 colonies to join the United States. It could also be your first state – the perfect place to purchase your first investment property in America.
Often overlooked due to its small size, Delaware offers a variety of opportunities for foreign nationals. In fact, Delaware has a lot of positive attributes, including a favorable business environment, affordable property prices, and a growing demand for rental housing. Read on to discover why Delaware is a standout in the real estate market and how you can easily navigate the investment process.
We are providing the following discussion to you for informational purposes only. All investments, including real estate, involve risk, and we encourage you to invest carefully. The information in this article is not intended to replace or serve as a substitute for any legal, real estate, tax, or other professional advice or service. You should consult with a professional in the respective legal, tax, accounting, real estate, or other professional area before making any decisions or entering into any contracts relating to a rental property.
Many real estate investors use debt-service-coverage-ratio (DSCR) loans. DSCR loans are tailored to investors looking to buy income-generating properties and offer a more streamlined way for non-citizens to finance real estate.
DSCR loans are specifically designed for property investors. Unlike traditional loans, these do not rely on the borrower’s personal income. Instead, they focus on the cash flow the property generates. To qualify, your property needs to be above a certain DSCR (usually between 1-1.2) that proves that the property will have cash flow after expenses.
DSCR loans simplify your investment process as a foreign national. Here are some of the key benefits:
Every lender has its own set of guidelines and criteria.1 With that being said, there are certain common requirements that most lenders adhere to. Here are a few key factors you’ll likely encounter:
Most Lenders: U.S. lenders typically find it easier to verify income from domestic sources, as they are more familiar with local financial systems. This often means that underwriters inspect U.S.-earned income less harshly than foreign income. However, if your income originates outside the U.S., some lenders may be more cautious and could delay or even deny your loan approval.
When dealing with foreign income, lenders will generally require more extensive documentation to ensure you have a stable and reliable income to repay the loan. This might include U.S. bank statements, pay stubs (if you have a salaried job), U.S. tax returns, rental income reports (if you already own rental properties), and other financial documents.
Waltz: At Waltz, we understand that income documentation can vary greatly depending on your country of origin. Rather than focusing solely on U.S.-based documents, we also review financial records from your home country, such as bank statements, pay, and other relevant documents to help qualify you.
While we do consider your personal income, the primary factor in our evaluation is the rental income potential of the property you're purchasing. Our aim is to simplify the process and provide the guidance you need to get approved smoothly.
Most Lenders: Many lenders may require a down payment of 30% and even up to 50% of the loan amount. In some cases, this could be even higher. Additionally, they may ask you to keep a certain percentage of the loan amount as a reserve in your bank account. This reserve is meant to cover scenarios where the property is vacant or needs maintenance and repairs. These requirements can often be a barrier for some buyers, making financing options more difficult to access.
Waltz: The down payment requirements for our loans vary based on the individual buyer's situation. While 30% is the usual standard, some buyers may qualify for a down payment as low as 25%. Our goal is to tailor the loan terms to fit your unique needs, making the process easier and more flexible.
Most Lenders: Typically, lenders will ask for your passport and visa. For loans on investment properties, they often require the loan to be made to a U.S.-based LLC, with you as the personal guarantor. In such cases, they may also ask for the LLC's operating agreement.
Waltz: Establishing proof of identity (KYC) is a standard practice for investment loans. To verify your identity, all we require is a valid passport, which can be from your home country. If you don’t yet have an LLC, we can assist you in setting one up. With our Investor Toolkit, you'll receive an LLC along with an Employer Identification Number (EIN)—and it’s ready in just minutes!
Most lenders: Credit scores play an important role in loan approval. While some lenders may accept scores as low as 640, the real challenge for international borrowers is the reliance on U.S. credit history. For foreign borrowers who don’t have a U.S. credit score, this can make it much harder to get approved. Even if you have a strong credit score in your home country, the absence of a U.S. credit history can be a significant obstacle.
Waltz: As a non-U.S. citizen, you may not have a U.S. credit score. That’s why we don’t require one for foreign national applicants. Instead, we assess your creditworthiness by reviewing your credit history from your home country, helping to ensure a fair evaluation of your financial standing.
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Choosing the right type of property is very important for making the most money from your investment and getting steady rental income. Different types of properties can make different amounts of money and are in different levels of demand. It also affects how you can get a loan because lenders have different rules for different property types, and it will decide how much time and effort you need to spend on managing and fixing the property. By picking the right property, you can lower your risks, reach your goals, and make your investment portfolio more stable.
Now that we’ve established how important the type of property is for success in real estate investment, let’s take a look at what Delaware has to offer.
Investing in Delaware real estate has several unique benefits for foreign nationals:
Wilmington is Delaware’s largest city with nearly 72,000 residents. It serves as the state’s financial hub and a center for professionals commuting to nearby cities. Several major employers are based here, including Bancroft Construction Company, DuPont, and Morris James law firm. Wilmington’s blend of historic charm and modern amenities drives strong demand in the rental market, making it a potential spot for residential investments.
Rehoboth Beach is a year-round destination, especially bustling in the summer, making it a prime spot for short-term rental investments. Its consistent popularity with tourists translates to high occupancy rates and strong returns for investors. In 2022, even as the COVID pandemic eased, demand for rentals in Rehoboth Beach remained strong, showcasing its resilience during economic uncertainty.
Dover, the state capital, offers a stable rental market driven by government employees, military personnel, and students. Government workers and military personnel at Dover Air Force Base provide reliable, long-term tenant options. Students also ensure consistent demand for housing, making Dover's central location and affordable prices ideal for steady rental income and low vacancy rates.
Before diving into Delaware’s real estate market, here are a few factors to keep in mind:
Refinancing your investment property in Delaware involves replacing your existing mortgage with a new one. For foreign nationals, the refinancing process typically includes:
With rate-and-term refinancing, you can modify the terms of your current mortgage, potentially securing more favorable terms for your loan. However, it's important to remember that even if you refinance at a lower interest rate, the overall cost of financing may end up being higher over the duration of your loan.
Cash-out refinancing helps you access your property's equity. If you're interested in Delaware real estate, the additional funds can be put towards upgrading your property, consolidating debt, or making a down payment on another property. By providing cash at closing, this option opens up more investment opportunities for you.
Learn more about refinancing.
Securing a mortgage for a U.S. investment property doesn’t have to be complicated. At Waltz, we make the process simple and transparent, guiding you every step of the way. These are the steps we recommend to find an investment property and get a mortgage with Waltz:
1. Find a profitable investment
The key to qualifying for a DSCR loan is selecting a property that generates strong rental income. Start by working with your real estate agent to identify properties with high rental potential. Before making an offer, carefully evaluate how each property aligns with your overall investment strategy and financial goals.
2. Gather essential documents
Gather the necessary documentation. This includes a valid passport (from your home country), proof of income such as bank statements, and property details that will show that it will be a profitable investment. Lenders may also request proof of assets or a credit report from your home country if applicable.
3. Select a lender experienced with foreign nationals
When looking for a lender, it's essential to choose one who understands the specific challenges foreign nationals face. You’ll want a lender experienced in verifying foreign income and working with applicants who don’t have a U.S. credit history. At Waltz, we specialize in DSCR loans for foreign investors–it’s what we do everyday.
4. Set up an LLC and U.S. bank account
To get a DSCR loan, you need to set up a U.S.-based LLC and a U.S. bank account2. While this process can be time-consuming, Waltz makes it easier with our Investor Kit, allowing you to quickly establish both your LLC with an EIN and a U.S. bank account, eliminating potential delays and streamlining your path to financing.
5. Submit your loan application
Before submitting your application, it’s a good idea to speak with an account executive who can address any questions and help ensure you're on track. They’ll help you understand the necessary documentation, including property details, your financial information, and proof of income, to make the process more efficient. Once everything is in place, submitting your application will be quick and seamless.
6. Perform due diligence
As part of the due diligence process, there will be a property inspection and an appraisal. The lender may also request additional documents to verify the property's condition and value. Lastly, take time to carefully review the term sheet to ensure the loan terms align with your investment goals.
7. Complete the purchase process
Once your loan is approved and due diligence is complete, you’re ready to close the deal. Sign the necessary paperwork to finalize the sale—if you're outside the U.S., Waltz can arrange a virtual signing. After that, transfer the funds, and you'll officially own your rental property in Delaware!
With its business-friendly environment, prime East Coast location, and steady rental market, Delaware is an exciting choice for foreign investors looking to capitalize on real estate opportunities. Whether you're focused on long-term growth or short-term rental success, the state has much to offer.
