Buying a rental
DSCR purchase loans: buy the rental on the strength of its rent
TL;DR
A DSCR purchase loan lets you buy a non-owner-occupied rental and qualify mostly on the property: the expected rent divided by the full payment. I run that ratio before you write the offer, so you know whether the deal works at your price, then I shop the file with wholesale lenders.
Run the ratio before the offer, not after
The most expensive mistake I see is an investor who goes under contract, orders inspections, and only then finds out the rent will not cover the payment at the loan size they need. The fix is cheap: run the DSCR first. You need four inputs you can gather for free: a realistic rent, the tax bill, an insurance quote and the HOA if there is one.
If the ratio is thin, you have options before you are committed. Offer a little less, bring a bigger down payment, look for a lower-premium insurance quote, or walk away. After you are under contract, those levers get harder to pull.
Where the rent number comes from on a purchase
On a property you are buying, there may be no lease yet. In that case, lenders lean on the appraiser, who completes a rent schedule comparing your property to similar rentals nearby. If the property comes with a tenant in place, the existing lease matters too, and many lenders will use the lower of the lease and the market rent estimate.
That is why I ask for your rent assumption and how you got it. A rent pulled from the top listing on a rental site is not the same thing as what an appraiser will support.
A purchase example with user-style numbers
Buying a three-bedroom rental
Appraiser market rent ................... $2,150
P&I on your loan amount (as quoted) ..... $1,390
Taxes ($2,880 / 12) ..................... $240
Insurance ($1,320 / 12) ................. $110
PITIA ................................... $1,740
DSCR = 2,150 / 1,740 = 1.24
If the rent came in at $1,900 instead, the ratio would drop to 1.09: still workable with many programs, but with a narrower menu. Running both cases before you offer tells you how much cushion you really have.
What you will need for a purchase file
- The purchase contract, once you have one.
- Bank or brokerage statements showing the down payment, closing costs and reserves.
- Entity documents if you are buying in an LLC: articles, operating agreement and EIN letter.
- An insurance quote for a landlord (dwelling fire) policy, plus flood if the property requires it.
- Any existing lease, if the property is tenant-occupied.
There is a fuller list in the DSCR document checklist guide.
Property types I see most often
Single-family rentals, townhomes and warrantable condos are the bread and butter. Two-to-four unit properties and small apartment buildings up to ten units work too, and so do short-term rentals with some lenders. Rural acreage, unique properties and anything that needs heavy renovation before it can be rented are harder and sometimes belong in a different product first.
Questions investors ask me about this
Can I use projected rent on a vacant property I am buying?
Yes, in most cases. Lenders typically rely on the appraiser's market rent estimate when there is no lease. Some will use the lower of a lease and market rent when both exist.
How much do I need for a down payment on a DSCR purchase?
It varies by lender, credit, property type and the ratio itself, so I do not quote a single number. Bring your scenario and I will show you what the wholesale lenders that fit it require.
Can I buy a DSCR rental in an LLC?
Yes. Many DSCR lenders allow vesting in an LLC, usually with a personal guarantee from the members. See the guide on DSCR loans in an LLC.
Want me to run your numbers?
Send me the property, the rent and what you are trying to do. I will run the coverage math, tell you where it stands, and shop it with wholesale lenders if it makes sense.