Fundamentals
DSCR Loan Case Studies: Three Deals, Full Numbers
Three detailed DSCR loan case studies with full deal numbers: purchase price, rent, DSCR ratio, rate, LTV, closing costs, cash flow, and outcome. Representative anonymized examples.
Important note: All three case studies below are representative, anonymized examples. They are constructed to illustrate realistic DSCR deal mechanics across different investor profiles and strategies. Numbers are benchmarked against actual lender programs, market conditions, and DSCR qualification criteria as of 2026. These are not records of any specific client transaction. DSCR Authority does not originate loans.
Case Study 1: The W-2 Earner Approaching the Fannie Cap
Investor profile: Marcus, 41, works in pharmaceutical sales. Annual W-2 income: $135,000. Owns 8 properties, seven financed conventionally and one free and clear. His DTI on the conventional portfolio is approaching the limit, and he’s one property away from the Fannie Mae 10-property cap.
The deal: Single-family rental in Indianapolis, IN — a three-bedroom, two-bath home built in 2004, 1,580 square feet, in a stable working-class neighborhood with consistent rental demand from healthcare and logistics workers.
The goal: Add one more cash-flowing property without touching his DTI or using one of his last two conventional “slots.” He wants to close in an LLC for liability protection.
Property Numbers
| Item | Amount |
|---|---|
| Purchase price | $240,000 |
| Property type | Single-family rental, 1-4 unit |
| Year built | 2004 |
| Square footage | 1,580 sq ft |
| Condition | Turnkey, recently remodeled kitchen |
| Current lease | 12-month lease, $1,950/month |
| Form 1007 market rent | $1,925/month |
Financing Structure
| Item | Amount |
|---|---|
| Loan amount | $180,000 (75% LTV) |
| Down payment | $60,000 (25%) |
| Rate | 6.375% 30-year fixed |
| Monthly P&I | $1,123 |
| Prepayment penalty | 5/4/3/2/1 step-down |
| Entity | Residential LLC (single-member) |
| Lender type | Non-QM DSCR lender |
PITIA Calculation
| Component | Monthly |
|---|---|
| Principal & Interest | $1,123 |
| Property taxes ($3,100/yr) | $258 |
| Hazard insurance ($1,440/yr) | $120 |
| Flood insurance | $0 (not in flood zone) |
| HOA | $0 |
| Total PITIA | $1,501 |
DSCR Calculation
| Item | Amount |
|---|---|
| Monthly gross rent (1007 or lease, lower of) | $1,925 |
| Monthly PITIA | $1,501 |
| DSCR | $1,925 ÷ $1,501 = 1.28 |
DSCR of 1.28 puts this deal in the 1.25+ tier — strong qualification, access to 80% LTV programs, best-tier mainstream pricing.
Closing Costs
| Item | Amount |
|---|---|
| Lender origination (1.25 points) | $2,250 |
| Processing/underwriting fee | $1,795 |
| Appraisal + Form 1007 | $1,050 |
| Title insurance (lender’s policy) | $875 |
| Owner’s title insurance | $680 |
| Escrow/closing fee | $650 |
| Recording fees | $125 |
| Prepaid hazard insurance (12 months) | $1,440 |
| Tax escrow (3 months) | $774 |
| Daily interest to close | $310 |
| Total closing costs | $9,949 |
Required Reserves
| Item | Amount |
|---|---|
| Required reserves (6 months PITIA) | $9,006 |
| Reserves remain in account (not disbursed) | Yes |
Total Cash Required at Closing
| Item | Amount |
|---|---|
| Down payment | $60,000 |
| Closing costs | $9,949 |
| Total out-of-pocket | $69,949 |
| Plus reserves (remain in account) | $9,006 |
| Total cash needed | $78,955 |
Cash Flow Analysis
| Item | Monthly |
|---|---|
| Gross rent | $1,950 |
| Vacancy allowance (5%) | -$97.50 |
| Effective gross income | $1,852.50 |
| PITIA | -$1,501 |
| Property management (9%) | -$175.50 |
| Maintenance reserve ($125/mo) | -$125 |
| Net cash flow | +$51 / modestly positive |
Cash-on-cash return: Slightly positive annual cash flow on roughly $80K of invested capital — modest by design. The investment thesis is equity building (30-year amortization, appreciation) + tax benefits (depreciation) rather than cash flow optimization.
Why DSCR Was the Right Choice
Marcus could not do this deal conventionally. His DTI at 8 properties (including primary mortgage) is already at 48% — the 9th conventional loan would push him over 50% and get declined. DSCR ignores his personal DTI entirely. Additionally, DSCR allows LLC vesting from day one — Marcus’s attorney had set up the LLC before contract, and the loan closed in the LLC’s name without the additional step of post-close deed transfer (which risks triggering the due-on-sale clause on conventional loans).
Documentation provided to DSCR lender: Driver’s license, LLC operating agreement, 2 months bank statements, credit report. No W-2, no tax return, no paystub.
Close time: 28 days from application to close.
Case Study 2: The BRRRR Execution — Fix-and-Flip into Long-Term Hold
Investor profile: Dana, 34, owns a landscaping business. Self-employed for 6 years. Three rental properties on DSCR loans (opened after her accountant told her conventional lenders wouldn’t use her tax returns because of aggressive business write-offs). She has learned the BRRRR strategy and wants to execute it for the first time.
The deal: Distressed single-family in Memphis, TN — a three-bedroom, one-bath home built in 1968, 1,100 square feet, needing full kitchen replacement, both bathrooms, flooring, paint, roof, and HVAC. The neighborhood is stable with strong tenant demand from regional Amazon distribution workers.
The goal: Buy the distressed property with hard money, renovate, rent, then refinance into DSCR, recovering most or all of her invested capital to redeploy.
Phase 1: Hard Money Acquisition
| Item | Amount |
|---|---|
| Purchase price | $62,000 |
| Rehab budget | $52,000 |
| Total project cost | $114,000 |
| Hard money loan (80% LTC) | $91,200 |
| Borrower cash in at closing | $22,800 |
| Hard money rate | 11.5%, interest-only |
| Points (origination) | 3.0% = $2,736 |
| Hard money term | 12 months |
| Monthly interest payment | $874 |
Total hard money closing costs (points + title + misc): ~$4,200
Phase 2: Renovation (Months 1-4)
The renovation ran four months — Dana used a local GC she had worked with on a previous project.
| Item | Budget | Actual |
|---|---|---|
| Kitchen (cabinets, counters, appliances) | $12,500 | $13,200 |
| Bathrooms (2) | $8,000 | $8,600 |
| Flooring (LVP throughout) | $7,500 | $7,100 |
| Paint interior/exterior | $4,500 | $4,500 |
| HVAC replacement | $8,200 | $8,200 |
| Roof replacement | $7,800 | $8,400 |
| Electrical updates | $3,000 | $2,900 |
| Landscaping, cleanup | $500 | $600 |
| Total | $52,000 | $53,500 |
The $1,500 overage was funded from Dana’s operating account. Happens on nearly every renovation — she had budgeted for it.
Phase 3: Rent-Up (Month 5)
Property professionally listed via property manager. Tenant secured in 18 days.
| Item | Amount |
|---|---|
| Monthly rent | $1,450 |
| Form 1007 market rent estimate | $1,425 |
| Tenant: | 2-year lease |
Phase 4: DSCR Refinance (Month 7)
Dana’s lender required 6 months seasoning from purchase date. She applied at month 6, closed at month 7.
| Item | Amount |
|---|---|
| Post-renovation appraised value | $148,000 |
| DSCR loan amount (75% LTV) | $111,000 |
| Rate | 6.50%, 30-year fixed |
| Monthly P&I | $701 |
| Prepayment penalty | 5/4/3/2/1 |
| Entity | Dana’s LLC |
PITIA Calculation:
| Component | Monthly |
|---|---|
| P&I | $701 |
| Property taxes ($1,800/yr) | $150 |
| Hazard insurance ($1,260/yr) | $105 |
| HOA | $0 |
| Total PITIA | $956 |
DSCR: $1,425 / $956 = 1.49 — well above minimum, excellent tier pricing.
The Capital Recovery Analysis
| Item | Amount |
|---|---|
| DSCR loan proceeds | $111,000 |
| Payoff of hard money loan | -$91,200 |
| Hard money accrued interest (7 months) | -$6,118 |
| DSCR closing costs (approx. 3% of loan) | -$3,330 |
| Net cash to Dana | +$10,352 |
Total cash Dana invested across all phases:
- Cash at hard money close: $22,800
- Hard money closing costs: $4,200
- Rehab overage: $1,500
- Hard money interest paid (7 months): $6,118
- Total invested: $34,618
Cash recovered at DSCR close: $10,352 Net cash remaining in the deal: $34,618 - $10,352 = $24,266
Dana has $24,266 of net equity invested into a $148,000 property carrying a $111,000 DSCR loan — approximately $37,000 in equity on $24,266 invested. She did not recover 100% of her invested capital, but she acquired $148,000 of property while keeping only $24,266 tied up.
Ongoing Cash Flow
| Item | Monthly |
|---|---|
| Gross rent | $1,450 |
| Vacancy (5%) | -$72.50 |
| Property management (9%) | -$130.50 |
| PITIA | -$956 |
| Maintenance reserve ($100/mo) | -$100 |
| Net cash flow | +$191/month |
Cash-on-cash return on remaining invested capital: $2,292/year ÷ $24,266 = 9.4% — before appreciation and tax benefits (depreciation, mortgage interest).
Why BRRRR Worked in This Deal
The key success factors:
- Bought well below ARV. $62,000 purchase + $53,500 renovation = $115,500 all-in vs. $148,000 ARV — a $32,500 spread that provided the DSCR refinance margin.
- Strong Memphis rent fundamentals. The $1,450/month rent on a $148,000 property = 0.98% RTV — close to the 1.00% ideal for DSCR deals.
- Disciplined renovation budget. Overruns were minimal ($1,500) because Dana used a known GC and had a detailed scope-of-work contract.
- Fast rent-up. 18 days to lease avoided the 45-60 day vacancy that would have added $2,000+ in hard money carrying costs.
- DSCR qualification on the appraisal. The 1.42 DSCR reflects a deal that cash flows strongly even at today’s rates.
Case Study 3: The Equity Extraction — Cash-Out Refi to Fund the Next Acquisition
Investor profile: James and Maria, 48 and 45, own 12 rental properties — six DSCR loans and six conventional loans from earlier in their career. They purchased a single-family rental in Columbus, OH in January 2022 with a DSCR loan at a 5.50% rate (originating in Q1 2022 before the big rate spike). The property has appreciated significantly and carries meaningful equity.
The goal: Extract equity from the Columbus property via a DSCR cash-out refinance to use as a down payment on a second property in Charlotte, NC — without selling Columbus, without triggering capital gains tax, and without using their own operating capital.
The Columbus Property: Current State
| Item | Amount |
|---|---|
| Original purchase price (Jan 2022) | $285,000 |
| Original loan amount | $213,750 (75% LTV) |
| Original rate | 5.50%, 30-year fixed |
| Current loan balance (after 3 years) | $205,200 (approx) |
| Current appraised value | $360,000 |
| Current equity | $154,800 |
| Current rent | $2,400/month |
| Current PITIA | $1,630/month |
| Current DSCR | 1.47 |
The property has appreciated $75,000 (26%) over roughly four years — a function of the 2021-2023 surge in Columbus home prices driven by technology employment growth and limited housing supply, with modest continued gains into 2026.
Evaluating the Cash-Out Refi
Maximum loan at 75% LTV: $360,000 × 75% = $270,000
Gross cash-out: $270,000 - $205,200 (existing loan payoff) = $64,800
Closing costs (estimated 2.5% of new loan): $6,750
Net cash-out after costs: $64,800 - $6,750 = $58,050
PPP check: The original 5/4/3/2/1 PPP expired after 5 years — January 2027. James and Maria are doing this refi in April 2026, which is still within the PPP window (Year 4 = 2% penalty).
PPP cost: 2% × $205,200 = $4,104
Revised net cash-out: $64,800 - $6,750 - $4,104 = $53,946
James and Maria had to weigh this $4,104 PPP cost against the benefit of accessing capital now vs. waiting until January 2027.
Their analysis: If they wait until January 2027 (9 months), the PPP drops to 1% ($2,052), saving $2,052. But they have a specific Charlotte property under contract that requires closing by July 2026. They proceed now and absorb the PPP.
New Columbus Loan Terms
| Item | Amount |
|---|---|
| New loan amount | $270,000 |
| New rate | 6.75%, 30-year fixed |
| New monthly P&I | $1,751 |
| Taxes | $375 |
| Insurance | $175 |
| New PITIA | $2,301 |
New DSCR check: $2,400 / $2,301 = 1.04
This barely clears the 1.00 minimum. James and Maria noted this is uncomfortably thin — any rent reduction or insurance increase could push below 1.00. They’ve built a 6-month reserve for Columbus specifically to manage this.
The rate increase consequence: The original 5.50% rate produced a $1,630 PITIA. The new 6.75% rate on a higher balance produces a $2,301 PITIA. Monthly cash flow on Columbus went from roughly breakeven to negative.
| Original (2022) | After Cash-Out Refi (2026) | |
|---|---|---|
| Gross rent | $1,900 | $2,400 |
| PITIA | $1,630 | $2,301 |
| Mgmt (9%) | $171 | $216 |
| Maintenance | $150 | $150 |
| Net cash flow | +$-51 | +$-267 |
The cash-out refi turned Columbus from roughly breakeven to negative cash flow. James and Maria accepted this trade-off: a cash-flow-neutral property becomes cash-flow-negative, but they’ve extracted $53,946 to deploy into Charlotte.
The Charlotte Acquisition
Using the $53,946 cash-out:
| Item | Amount |
|---|---|
| Charlotte property purchase price | $215,000 |
| Down payment (25%) | $53,750 |
| Cash used (from Columbus cash-out) | $53,750 |
| DSCR loan amount (75% LTV) | $161,250 |
| Rate | 6.375%, 30-year fixed |
| Monthly P&I | $1,006 |
| Property taxes | $210 |
| Insurance | $130 |
| HOA | $0 |
| PITIA | $1,346 |
| Monthly rent | $1,700 |
| DSCR | $1,700 / $1,346 = 1.26 |
Charlotte cash flow:
- Gross rent: $1,700
- Vacancy (5%): -$85
- Management (9%): -$153
- PITIA: -$1,346
- Maintenance: -$125
- Net: -$9/month (approximately breakeven after all expenses)
Combined Portfolio Effect
| Property | Cash Flow After Expenses |
|---|---|
| Columbus (post-refi) | -$267/month |
| Charlotte (new) | -$9/month |
| Combined | -$276/month |
James and Maria are now carrying $276/month in negative combined cash flow on these two properties. They are comfortable with this because:
- Their other 10 properties generate $3,200/month in aggregate positive cash flow
- They are building $2,882/month in combined principal (equity from amortization across all 12 properties)
- The depreciation deductions from Charlotte add approximately $7,800/year in tax benefits
- Based on 2026 national forecasts of 1-4% home-price appreciation, Columbus is projected to appreciate $4,000-$14,000/year and Charlotte $2,000-$9,000/year — down from the 2021-2024 pace but still a meaningful equity contribution
Effective acquisition: James and Maria acquired a $215,000 Charlotte property at zero additional out-of-pocket cash investment (the $53,946 came from the Columbus cash-out). The real cost is negative cash flow on Columbus — an ongoing $267/month — essentially paying rent to borrow the equity.
The Alternative They Evaluated: Sell Columbus
If they had sold Columbus instead of cash-out refinancing:
- Sale price: $360,000
- Agent commission (5%): -$18,000
- Seller closing costs: -$3,500
- Loan payoff: -$205,200
- PPP (2%): -$4,104
- Net before taxes: $129,196
Taxes:
- Original cost basis: $285,000
- Depreciation taken (3 years): ~$20,700
- Adjusted basis: $264,300
- Capital gain: $360,000 - $264,300 = $95,700
- Federal capital gains tax (15% bracket): -$14,355
- Depreciation recapture (25%): -$5,175
- Net investment income tax (3.8%): -$3,637
- Net after taxes: approximately $106,029
They would have had $106,029 from selling Columbus — but they’d have lost the cash-flowing asset (even at breakeven after refi, it’s an asset worth $360K with a $270K loan = $90K of equity at new LTV, growing over time).
The cash-out refi gave them $53,946 (less than the $106K from selling) but kept the asset. The decision hinged on their conviction that Columbus would continue appreciating and that the negative cash flow was manageable within the broader portfolio.
Key Lessons Across All Three Case Studies
Lesson 1: Market selection determines DSCR viability
All three deals — Indianapolis, Memphis, Columbus — are in markets where rent-to-value ratios consistently produce 1.00+ DSCR at standard 25% down and current DSCR rates. None of these deals would have worked in San Francisco, Seattle, or suburban Boston at 25% down. Market selection is upstream of deal selection.
Lesson 2: DSCR ignores your personal financial complexity
Marcus (Case Study 1) couldn’t do a conventional loan due to DTI. Dana (Case Study 2) can’t document income conventionally because of business write-offs. James and Maria (Case Study 3) have 12 properties and multiple entities. None of that mattered to DSCR lenders. The property’s cash flow was the deciding factor in all three.
Lesson 3: Cash flow vs. equity building is a spectrum, not a binary
Case Study 2 (the BRRRR) produced the best cash-on-cash in the near term (9.4%) because of the value-add execution. Cases 1 and 3 produced thin cash flow — which is typical for 1.10-1.30 DSCR deals at mid-6% rates with full expenses. The equity buildup, appreciation, and tax benefits complete the return picture.
Lesson 4: The prepayment penalty must be part of every DSCR decision
In Case Study 3, the PPP cost $4,104 — not catastrophic but not immaterial. It forced a timing decision (accept cost now vs. wait 9 months). If James and Maria had been in year 1 of their PPP (5% × $205,200 = $10,260), the math would have been meaningfully different.
Lesson 5: DSCR is a 30-year tool, not a 30-month tool
The buy-and-hold investors in these case studies are using DSCR as long-term infrastructure. The 30-year fixed rate locks in a known payment forever. BRRRR with DSCR refinance converts short-term hard money capital into long-term permanent debt. Cash-out refis convert equity into deployed capital while keeping the underlying asset. These are holding strategies, not trading strategies.
Next Steps
Ready to model your own deal? Use the DSCR Calculator to run DSCR on any property before you make an offer. For the BRRRR strategy mechanics: BRRRR Modeler. For cash-out refi timing: Refinance Timing Optimizer.
Compare lenders for your specific market and profile: get matched — free, no obligation. For current rate benchmarks: /rates.
For more strategy depth: Portfolio Scaling Playbook, Market Selection for DSCR, and Cash-Out Refi Strategy.
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Hand-picked next steps — whether you want to go deeper on this topic, compare alternatives, or run the numbers.
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Frequently asked questions
Are these case studies from real clients?
No. These are representative, anonymized examples constructed to illustrate how DSCR deals actually work across different investor profiles and strategies. The numbers are realistic — benchmarked against actual market conditions, typical lender programs, and real DSCR qualification criteria as of 2026 — but they are not drawn from any specific individual's transaction. DSCR Authority does not originate loans and does not hold client transaction records.
What does a typical DSCR deal look like for a first-time DSCR borrower?
Case Study 1 in this guide (the W-2 earner approaching the Fannie cap) is representative of a typical first-time DSCR borrower. The key characteristics: strong credit (720+), stable property in an affordable Midwest market, DSCR above 1.10, 25% down, 30-year fixed rate. The main differences from a conventional loan: no income documentation, LLC vesting from day one, a 5/4/3/2/1 prepayment penalty, and a rate approximately 0.375-0.50% higher than a comparable conventional investment loan.
Can a BRRRR deal actually work at current 2026 rates?
Yes, as Case Study 2 demonstrates. BRRRR remains viable in 2026 in markets with sufficient value-add spread (buying meaningfully below ARV after renovation) and strong enough rent-to-value ratios. The math is tighter than it was in 2021 when DSCR refinance rates were 4.25-5.00%, but with the DSCR 30-year fixed range now back in the low-to-mid 6% band, markets like Memphis, Indianapolis, Cleveland, and Birmingham still produce workable BRRRR numbers with disciplined execution.
What is a cash-out refinance case study?'
Case Study 3 in this guide shows an investor who purchased in 2021 at a below-market rate, held the property for three years of appreciation and amortization, then executed a cash-out refi to extract equity for a second acquisition — without selling the property or paying capital gains tax. The case illustrates the tax efficiency of the cash-out vs. sale decision.
What DSCR is considered strong vs. marginal?
A DSCR above 1.25 is considered strong and unlocks the best pricing tiers at most DSCR lenders. 1.10-1.25 is solid and broadly fundable. 1.00-1.10 is acceptable at mainstream lenders but carries a small pricing penalty. Below 1.00 (down to 0.75) is possible with specific programs at tighter LTV and higher rates. The case studies in this guide feature DSCRs ranging from 1.23 to 1.47 — realistic working deals, not idealized examples.
How important is the market choice to DSCR viability?
Critically important, as the case studies show. All three deals are in Midwest/Southeast markets (Indianapolis, Memphis, Columbus) where rent-to-value ratios consistently produce 1.00+ DSCR at standard 25% down and current DSCR rates. The same investment strategies with the same capital deployed in high-cost coastal markets would either fail to qualify at 1.00 DSCR or require 35-40% down payments to generate qualifying cash flows.
What closing costs should I expect on a DSCR loan?
Case Study 1 details typical DSCR closing costs: lender origination (1-2 points), processing/underwriting fee ($1,500-$2,500), appraisal + 1007 form ($850-$1,200), title insurance, escrow/closing fees, prepaid items (first-year insurance, tax escrow). Total closing costs on a DSCR loan typically run 3-5% of the loan amount. This is higher than conventional loans (which run 2-3% typically) due to origination points and additional DSCR-specific appraisal requirements.
How much cash do I need to close a DSCR loan?
Total cash needed at closing includes: (1) down payment (20-25% of purchase price), (2) closing costs (3-5% of loan amount), and (3) required reserves (2-12 months PITIA depending on lender and LTV). Case Study 1 illustrates this calculation: 25% down on a $240,000 property = $60,000, plus roughly $9,900 in closing costs, plus about $9,400 in required reserves (6 months PITIA) = roughly $79,300 total cash needed. Many lenders allow reserves to remain in accounts rather than be disbursed — but they must be documented.