DSCR Loans: Real Estate Investment Funding Based on Cash Flow
When scaling a real estate portfolio, access to smart financing is critical. Traditional mortgage loans require proof of personal income, tax returns, and strict debt-to-income (DTI) ratios. For many investors, this slows growth. Debt Service Coverage Ratio (DSCR) loans solve this problem by qualifying you based on property cash flow not your personal income.
What Is a DSCR Loan?
A Debt Service Coverage Ratio (DSCR) loan is a type of real estate investment loan that measures whether a property’s rental income is enough to cover its debt obligations. Instead of focusing on your W-2 income or tax filings, lenders evaluate the property itself, making DSCR loans one of the most flexible options for real estate investors.
How DSCR Is Calculated
The DSCR formula is:
DSCR = Net Operating Income ÷ Debt Payments
Example:
Monthly rental income: $5,000
Monthly mortgage payment: $4,000
DSCR = 1.25 (a strong ratio most lenders approve).
Most lenders require a DSCR between 1.0 and 1.25, with higher ratios considered lower risk.
Typical DSCR Loan Interest Rates
DSCR loan interest rates are typically higher than conventional mortgage rates because they offer more flexibility. Current DSCR loan rates usually range from 7% to 10%, depending on:
The property type (residential vs. commercial).
Loan term and size.
Lender requirements.
Your DSCR score.
When to Use a DSCR Loan
Investors should consider DSCR loans when they:
Want to buy or refinance rental properties.
Are limited by traditional mortgage income requirements.
Need quick access to capital for a property purchase.
Plan to scale their real estate portfolio with cash-flowing assets.
Benefits of DSCR Loans for Investors
No personal income verification – approval is based on property cash flow.
Scalability – expand your portfolio without personal DTI limits.
Speed – streamlined underwriting closes deals faster.
Flexibility – can finance both residential and commercial rentals.
Risks and Drawbacks of DSCR Loans
Higher rates than traditional mortgages.
Cash flow risk – if rental income drops, repayment could be challenging.
Higher down payments – often 20–25% required.
Why DSCR Loans Are Valuable for Real Estate Investors
For real estate professionals and investors, DSCR financing provides a powerful way to grow. By removing personal income from the equation, DSCR loans unlock opportunities to acquire, refinance, and scale rental properties with speed and efficiency.
At Libiano Partners, we specialize in connecting real estate investors with tailored financing solutions, including DSCR loans. Fill out our intake form today to see how a DSCR loan can help you expand your rental property portfolio.
