Eligible Property Types for DSCR Financing

DSCR loans are built for residential investment property that is ready to rent today. Single-family homes, townhomes, planned unit developments, many condos and 2 to 4 unit buildings are the usual fits. Some lenders also accept short-term rentals or small apartment buildings. Owner-occupied homes and properties that need major work typically do not qualify, and commercial buildings usually fall under separate commercial programs. RSC Private Lending's DSCR Rental program covers single-family, 2 to 4 unit, condo, townhome and PUD rentals, and short-term rentals are welcome.

The common fits

Single-family homes, townhomes and PUDs. Planned unit developments (PUDs) are communities with an HOA, common in newer subdivisions. These are the easiest to underwrite because rents and sale comparables are plentiful.

Condos. Many lenders accept warrantable condos, meaning the building meets standard guidelines for things like HOA finances, owner-occupancy mix and litigation. Non-warrantable condos may be possible with some lenders under adjusted terms.

2 to 4 units. Duplexes, triplexes and fourplexes are still residential for lending purposes. The lender adds up rent from every unit, using market rent for any that are vacant.

Sometimes eligible

Short-term rentals. Some programs accept nightly rental income, using booking history, a share of projected revenue, or long-term market rent instead. Local rules must allow short-term rentals.

5 or more units. These are commercial properties. Some DSCR lenders cover small apartment buildings under separate guidelines. Others do not. RSC's DSCR Rental program covers 1 to 4 unit properties.

Usually not eligible

• Homes you live in, or plan to
• Buildings with a large commercial component, such as storefronts with apartments above
• Rural properties on large acreage with few comparable sales
• Properties needing major repairs before they can be rented
• Manufactured housing, at some lenders
• Unusual properties with a thin resale market
• Condo-hotels, in many programs

Condition matters as much as type

Even an eligible property must be safe, habitable and ready to rent. Big repair backlogs or structural problems usually have to be fixed first.

Example (illustrative only): An investor buys a dated duplex with a leaking roof and one unit gutted. It does not qualify for a DSCR loan yet. The investor uses a short-term rehab loan, fixes the roof and finishes the unit, then leases both sides at $1,500 each. Now the property is rent-ready, and a DSCR refinance can replace the rehab loan.

Location and the appraisal

The appraiser needs comparable sales and rentals to support value and rent. Properties in areas with very few comparables can be hard to value, which can affect eligibility or loan size.

What this means for you

Target residential rentals that are ready for tenants and have plenty of comparables. If a property needs work first, finance the rehab with a short-term flip or bridge loan, then refinance into DSCR once it is leased.

Not sure whether your property fits? Send RSC Private Lending your scenario for a term sheet in 24 hours. All loans are business-purpose and subject to underwriting.