The local private lending firm, Norfolk Capital, has a new loan product with hopes it will help to continue its intention of helping the community.

Called the Debt Service Coverage Ratio (DSCR), this loan product is “a rental property loan that qualifies borrowers based on the income generated by the property rather than personal income.”

Lenders decide if “the property’s rental income covers the proposed loan payment, as these loans are designed for real estate investors, not owner-occupants.” Unlike a conventional loan, this loan product qualification is based on rental income, instead of W-2s or tax returns.”

Owner Patrick Targete said that he recommends this new loan product for community members who are retired, own property, and either no longer have income or do not have a lot of income.

“They have a lot of equity in these properties. You have a lot of our older generation…that have tons of equity, [but] they have no credit, don’t have any W-2 [forms], or tax returns that they can use to show income. [Yet], the properties that they own, these people are renting these properties out. You [have] these three family [houses] in Dorchester, Roxbury, Mattapan, that are… making anywhere from $2,000 to $3,000 a month for these properties. These people have a ton of equity,” he said.

“But say they may get ill and need money for some type of medical care or they want to buy a car, because they can’t get around. How do they access their capital? - DSCR, because…all we need is the income of the property. As long as the income of the property could cover the mortgage, we will lend you that capital.”

He also said that the DSCR loan products are for the contractors and investors, who are buying properties and flipping them.

“When they flip a property, they have to sell it, but when they sell it, they have to pay this huge capital gains — but now the way you create generational wealth is instead of you flipping that product now, maybe we could refinance you through a DSCR long term,” he said.

“DSCR loans go for 30 year loans, so their interest rates are much lower. The DSCR rates start at 5.25% to 7%. So it allows our community to buy properties and rent them out and create wealth for generations to come.”

While these are the primary community members that may benefit from the DSCR loans, Targete said that these loans are truly for everyone in the community.

“There’s no one person this is not for. You have the individuals that use the DSCR loans just to get out of the situation that they’re in financially. They use the cash out of that property to fix their credit, to pay down some bills. Then, they could go back and go get a conventional loan… and their interest rate could come down maybe 2%,” he said.

He also shared what made him decide to add the DSCR loan product offering into his business after doing a lot of the Bridge Loans, which are “designed for real estate investors for short term funding for investment properties.”

These Bridge loans last for one to two years giving investors more time “to secure or refinance a property while [they] prepare to qualify for conventional financing or sell[ing] the property.”

Through the Bridge loans, Targete would mentor his borrowers to keep the properties and not to flip them, because they are paying taxes. Then his company would always refer them out to conventional lenders, who he said gets about 50% of these deals done.

“We’ve noticed DSCR products started coming out as the industry started to grow. You see a lot more private capital come into the market and people start creating different ways to lend them money, because people start to realize that the value in real estate and the security in real estate is like no other,” he said.

So we decided to take on the DSCR products, because we realized that they didn’t need tax returns, they didn’t need credit high credit scores, they didn’t need W-2s, and we could get these loans financed as long as these individuals that were renovating these properties, were renting them out, and creating that cash flow. We would [then] be able to transfer them into these loans long term. These are 30 year loans now, so now you’re really creating generational wealth for years to come.”

Lastly, Targete shared how the DSCR loans help with Black home ownership in the city, especially for the next generation.

“This helps them a lot…they might not have that job yet or they might not have the tax returns set up yet, but…maybe their aunt or their cousin had a piece of property that [they] wanted to get rid of because they were getting older and they couldn’t buy it. Now, here we come. We could finance them to buy this property. You know, we can finance them to take ownership, help them out, and watch them…hold on to it,” he said.

“When you’re young…in the neighborhood, you’re 20 years old, and you buy a piece of property, you could pay top dollar for it, because by the time you’re 50 years old, it’s paid off. [When] you’re 40 years old, it’s almost paid off. So it’s very important for the young generation [to]...take advantage of these opportunities. It’s only like a bridge. It’s not like this is your end [or] the only option you have… it’s an option…What happens is, at the end of the day, it’s home ownership.”