If you're on your second or third property, you've probably hit the wall already: the bank counted every rental as debt, or your tax return shows what your accountant left in, not what you made. How long have you been working around that?
A DSCR loan asks a different question. Not "what do you earn," but "does this building's rent cover this building's payment." If it does, the loan works, whatever the return says. And if you're wondering where that rent number comes from, since nobody tells you:
Where the rent number comes from:
A tenant's in place.
The lease, or the appraiser's opinion of market rent, whichever is lower.
It's empty.
The appraiser writes the rent schedule for that property in that neighborhood. That's the number, whatever the listing promised.
It's a short-term rental.
Documented history or a supported projection can count, once the town allows it.
Here's what the lender leaves out: a DSCR lender will fund a property whose rent doesn't cover the payment, as long as you put more down. That's the lender's risk math. It has nothing to do with whether you should own the building.
So what does the property you're looking at actually clear, per door, after the full payment, the taxes, the insurance, the HOA, and something set aside for the roof? If the answer is a real number, you're ready to write. If the answer is "not yet," what's the plan that makes it worth carrying anyway: a unit you'll use part of the year, a lot you'll build on, a lease that resets in spring? A reason is fine. A hope isn't. And if you buy on hope, what does the second month look like?
Before we write the offer, I’ll ask:
What does it clear per door, on the rent the lender will count, not the rent in the listing?
If it doesn't clear yet, what's the plan, and how long does the plan take?
Where's the down payment coming from: cash, a retirement account, or the house you live in?
The bank tells you what it'll lend. It never tells you whether the property is a good idea. I'm the one who asks the second question, and then I write the offer.
— Bobby Friel · CO Home Equity
If this property cleared money every month without touching your paycheck, what would your offer look like?
| Conventional | DSCR | Equity-funded down payment | |
|---|---|---|---|
| Qualifies on | You | The building | Funds the down payment on either |
| Tax returns | Yes | No | No |
| Fits | First rental, strong income | Second property and up; self-employed | Equity at home, cash you'd rather keep |
| Rate | Lowest | Higher | A line on your primary home |
| Prepayment penalty | No | Usually, first few years | No |
| Reserves | Some | Several months of payments | — |
| Short-term rental | Where the town allows | Where the town allows; history or projection counts | — |
| Condo-hotel unit | Rarely | Often | — |
First rental with strong income? Conventional, almost every time. Second property and up, or a return that hides your income? DSCR is usually the option. Either way, if the cash isn't there, the house you live in may be.
Put in the property you're looking at. The rent the lender will count, not the rent in the listing.
DSCR
1.10
1.00 — Breakeven. Covers the payment, nothing for the roof. Tight.
Clears per door
$298 / mo
This is an estimate on the numbers you entered. The lender counts the lease or the appraiser's rent, whichever is lower, and an investment loan carries a higher rate than a primary home. The real number comes from a conversation.
Want me to check these numbers before you write?You already own or manage rentals and the bank says your ratios are full.
You’re self-employed and the return shows less than you make.
You want the property in an LLC.
The building clears per door, by the lender’s count and by yours.
It's your first investment property. That's conventional, and it's cheaper.
The down payment would drain your reserves. DSCR needs money left in the bank.
It doesn't clear and there's no plan that justifies it.
You'll live in it. Two to four units with you in one is a great way to start, on a different loan and a different page.
Illustrative, not specific clients
Three rentals, all paying, and a bank that counted every one as debt and stopped at the fourth. His return showed a modest year; that's what his accountant is for. We ran the fourth property's lease through the DSCR, it cleared per door, and the loan funded in his LLC in about a month. The bank never saw the return.
Twenty years in the same Edwards house, mostly paid down, and a condo in Eagle they wanted as a long-term rental. The down payment was in their walls. A line of credit on the house they live in funded it, a conventional loan carried the condo, and the rent clears both payments with margin. Savings untouched.
One desk, both sides. Here's the order.
You bring the property and the DSCR you ran. We talk about what it clears, what you own, and what your return shows. You leave with an action plan.
Through my secure client portal, or by phone. DSCR skips the tax returns; conventional needs them.
Real numbers now, on this property: conventional, DSCR, and the equity-funded down payment. Per-door math on the table. We decide together.
If I'm your agent, I confirm the rents the town supports and the rental rules, then write it. If you have an agent, I work with them.
The appraiser sets the rent the lender counts. I've seen what comes back light, and we handle it early.
Papers, keys, done. Our insurance partner has the landlord policy bound before you sit down.
DSCR files often move faster than conventional. There's less to document.
Each path goes straight to the loan built for it.
Most investment-property advice online is written by someone selling a course. The math is simpler than they make it: the rent, as the lender will count it, has to clear the full payment per door; the town has to allow the rental; and the loan has to fit the file you actually have.
I've watched investors with real income get turned away over a tax return, and I've watched others get a loan on a building that was never going to make money, because the lender's math said yes. Same mistake both times: letting the loan decide whether the property is a good idea.
Run the number above. If it clears, bring it to me and we'll write the offer with the loan already picked. If it doesn't, bring it anyway and we'll see whether there's a plan or just a hope.
Bring the property. You leave the first call with the rent the lender will count, the number it clears per door, and the loan that fits, before you write.
Investment property loans are business-purpose loans. Rates, terms, and reserve requirements vary by file. Every figure on this page is an estimate until your file is underwritten.
DSCR and conventional investment property loans placed by Bobby Friel, licensed mortgage broker and licensed real estate broker, Colorado. Landlord insurance through our insurance partner. (720) 799-2202 · info@cohomeequity.com.
Bobby Friel · NMLS# 332039 · Friel-Good Mortgage, Inc. · NMLS# 1901977 · Edwards, Colorado