How Florida Real Estate is Growing Rapidly from DSCR Loans
The Florida real estate market has been growing a lot due to many people from other states moving here. These people often need places to rent, which has made the demand for rental homes go up. Let’s look at how this happened and what role rental property loans played in accelerating this trend.
Why Are People Moving to Florida?
Many people like moving to Florida because it’s warm, there’s no state income tax (which means they don’t have to pay extra tax on the money they earn), and living there can be cheaper than in states like New York or California. 2020 accelerated the trend from New York to Florida even further, because they could work from home and didn’t have to stay in big, busy cities.
How Does This Affect Real Estate?
Since more people are moving to Florida and many of them want to rent homes at first, the prices for renting homes have gone up. This makes owning rental properties a good way to make money. As a result, more people are interested in buying homes to rent them out, and more homes are being built or changed into rental units. This pushes up the prices of homes in Florida.
What About Rental Property Loans?
To buy these properties, many people use something called rental property loans. These loans let people borrow money based on rental income and not personal income, allowing regular people to become real estate investors and compete with cash buying investors. Therefore, they don’t have to use as much of their own money. This is called high leverage—using a lot of borrowed money to try to make more money.
These loans are popular because:
You need less money to start, so you can buy a property with less of your own money. The money you pay as interest on these loans can often be deducted from your taxes, which saves you money. And if the money you make from renting out the property is more than what you need to pay back the loan, you could make a good profit.
Most importantly, lenders offering rental property loans typically use a DSCR ratio to approve or deny these type loans. Rather than using your personal income, private money lenders will look at rental income, property taxes, landlord insurance and more. If you’re interested, this is a great DSCR loan calculator for rental properties.
In short, Florida’s real estate market is booming because of all the new people moving in and the easy-to-get loans that help people buy rental properties. While there are chances to make good money, there are also risks, especially if the market or economy gets worse. The future of Florida’s housing market will depend on whether people continue to move there and how the economy does.