Case Study: DSCR Loan in Birmingham, AL

About The Deal In Birmingham, Alabama

A three-bedroom, two-bathroom single-family in Ensley, a working-class neighborhood on Birmingham, Alabama's west side, purchased at $100,000 to hold as a long-term rental. The 993-square-foot home, built in 1951, had been recently renovated, with the kitchen, bathrooms, LVP floors, HVAC, plumbing, and electrical all updated within the prior year. Ridge Street Capital funded the purchase as a DSCR loan at 80% LTV through its rental program in Alabama. The loan amount came in at $80,000, below the $100,000 floor most DSCR programs will not cross.

WHAT MADE IT SPECIAL FOR A DSCR UNDER $100K

• Sub-$100K loan amount on a stabilized, rent-ready property. Most DSCR lenders set a $100,000 floor on loan amount. Ridge Street Capital reviewed the deal on its fundamentals: a recently renovated single-family in a stable rental corridor, appraised above purchase price, with confirmed rental income above the DSCR threshold. The reason most lenders decline small-balance files is loan-size economics. This deal had no credit quality concerns. It was underwritten under conservative numbers,
• Appraiser valued the property at $115,000 against a $100,000 purchase price. The appraiser used the sales comparison approach and placed value at $115,000, which is $15,000 above what the investor paid. Additionally, an independent cost approach came in at $117,020. The investor entered the deal with $15,000 in immediate equity and a loan at 80% LTV on the purchase price, which corresponds to 69.6% on the appraised value. Ridge Street Capital structured the purchase as a DSCR loan under an LLC, with the investor's entity holding title.
• Underwrote on conservative market rent: $1,000/month. The market rent used to calculate DSCR was $1,000/month. Ridge Street Capital underwrote that figure against $741.05 in monthly PITIA, producing a 1.35x DSCR and $258.95 in positive monthly cash flow. For context, the property appeared on Zillow at $1,350/month at the time of closing. At that rate, DSCR on the same PITIA would be 1.82x and monthly cash flow would be $608.95.

THE RESULT

The completed DSCR rental purchase gave the investor a stabilized long-term rental in Birmingham's Ensley neighborhood at 80% LTV, 1.35x DSCR, and $258.95 in positive monthly cash flow with projected 11% cash-on-cash return.

• Loan Amount: $80,000 (30-Year Fixed DSCR Loan)
• Rate: 7.750%
• LTV: 80%
• DSCR: 1.35x
• Purchase Price: $100,000

MORE ABOUT RIDGE STREET CAPITAL

Ridge Street Capital provides fix and flip loans, DSCR rental loans, and ground-up construction financing to real estate investors across 36 states. Our focus is exclusively on investment properties, which means every deal we evaluate gets the attention of a team that has seen the full range of what makes an investment work or fail.

If you want a lender who will tell you clearly whether a deal makes sense and move fast when it does, fill out the form and contact us.