Long-time Modesto landlords have an advantage that new buyers do not: a property tax bill based on what they paid years ago. Because a refinance does not trigger a Prop 13 reassessment, that low tax line stays in place and helps the DSCR on a cash-out.
In short: LendingStreet offers DSCR cash-out refinances on 1-8 unit rentals in Modesto and across Stanislaus County up to 75% LTV, qualified on the property's rent rather than tax returns. The new full payment needs to clear a 1.0x standard minimum DSCR, the minimum credit score is 620 and LLC owners are standard. Seasoning before cash-out varies by program.
Many owners bought Modesto, Ceres and Turlock rentals in the years after the housing crash, when Central Valley prices were deeply depressed. Those homes are now worth far more, and the owners are using cash-out refinances to buy more rentals, fund rehabs, pay off higher-cost debt or build reserves.
Because a DSCR loan qualifies on rent, owners whose tax returns show little income after depreciation can still qualify.
Owners in Modesto often use the cash close to home: a second rental in Turlock or Riverbank, a fourplex near downtown, or the rehab budget for a dated ranch home. Others use it to pay off a private or short-term loan that is coming due.
Under Proposition 13, a property is reassessed when it changes ownership or is newly built, and otherwise its assessed value can rise only a small amount each year. A refinance is not a change in ownership. So a rental bought a decade ago often carries a tax bill far below what a new buyer would pay, and that lower tax line goes straight into a stronger DSCR.
Be careful about moving the deed. Transferring a property from your personal name to an LLC, or between entities, can trigger a reassessment in some situations. Get advice before you change title for the refinance.
This example is illustrative and not a quote. An investor owns a Ceres single-family rental worth $430,000 with a $95,000 balance. Because of its older Prop 13 base, taxes are only about $190 a month. It rents for $2,400, and insurance is $160. Closing costs are estimated at $7,500.
At 75% LTV the new loan is $322,500 and the investor receives about $220,000. Estimated principal and interest is about $2,227, the total payment about $2,577 and the DSCR about 0.93x. At 65% LTV the loan is $279,500, cash out is about $177,000, the payment about $2,280 and the DSCR about 1.05x. A new buyer of the same home would pay taxes on $430,000, which would push both ratios lower.
| Item | 75% LTV | 65% LTV |
|---|---|---|
| New loan | $322,500 | $279,500 |
| Existing payoff | $95,000 | $95,000 |
| Estimated cash to investor | $220,000 | $177,000 |
| Estimated principal and interest | $2,227 | $1,930 |
| Total monthly payment | $2,577 | $2,280 |
| DSCR at $2,400 rent | About 0.93x | About 1.05x |
Standard programs go up to 75% of appraised value, sometimes less on 5-8 unit buildings and larger balances, which varies by program. The new loan pays off the existing mortgage and closing costs, and the rest comes to you. The rent must cover the new full payment at the program's minimum ratio. In Modesto, the ratio is usually what limits the cash, so many owners take somewhat less than the maximum.
The appraiser sets the value from nearby sales. Homes with updated kitchens and baths, newer roofs and working central air support a higher number, while deferred maintenance pulls it down. Take care of obvious repairs before the appraisal if you can.
Your existing landlord policy needs to meet the new loan's coverage requirements. With California carriers tightening, some owners discover at refinance that their policy is being non-renewed or that replacement coverage costs more. Check your renewal date and get a current quote before you apply, and use that figure in your numbers.
If your only option is the California FAIR Plan with a separate policy for the remaining coverage, it can still work when the combined coverage meets program requirements, but the higher total premium lowers the ratio.
If you bought and renovated recently, some programs allow cash-out on the new appraised value after a short ownership period, while others base the loan on your cost until more time passes. Share your purchase date, price and rehab spend up front, and see our seasoning guide.
We review current leases and the appraiser's market rent. Under California's statewide rent cap, in-place rents on many units can rise only within set limits, so do not plan a cash-out around a big rent increase on an existing tenant. Have the leases in the borrowing entity's name if the loan will close in an LLC.
Owners with five or more Stanislaus County rentals can look at a blanket portfolio loan, which refinances them under one loan and one payment, qualified on combined cash flow, with release provisions for later sales. Properties in more than one state can be combined on some programs. That can suit Modesto owners who also hold rentals in other states, as well as those with homes spread across Turlock, Riverbank, Ceres, Oakdale and Salida.
Our investor loans are business-purpose loans on non-owner-occupied property. Send the address, estimated value, payoff, lease and tax bill through the form below, or call (877) 298-1001. For statewide context, see our California cash-out refinance page.
Up to 75% of appraised value on standard programs, less payoff and costs, as long as the rent covers the new payment at the program minimum.
No. A refinance is not a change in ownership, so it does not trigger a Prop 13 reassessment. Changing title can be different.
Possibly, but some transfers can trigger reassessment. Get tax or legal advice before changing title.
No. The loan qualifies on the property's rent, with a 620 minimum credit score.
In Modesto, the DSCR often limits the loan before the LTV does. A smaller loan keeps the payment within what the rent supports.
Seasoning varies by program. Some programs use the new appraised value after a short period; others limit cash-out to cost for longer.
An appraisal, title insurance, escrow and recording fees, plus any payoff interest and escrow deposits for taxes and insurance. A refinance does not trigger documentary transfer tax.
Yes. The loan qualifies on the combined rent of all units.
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