Skip to main content

DSCR Tips & Optimization

Pro strategies to improve your DSCR ratio and get better rates.

How to Improve Your DSCR​

Strategy 1: Increase Rental Income​

  • Raise rent to market rate - Lenders use higher of actual or market
  • Add value - Renovate to command higher rent
  • Consider rent-by-room - Can increase income 20-40%
  • Short-term rental - Airbnb can dramatically increase income

Strategy 2: Reduce Your PITIA​

  • Lower interest rate - Pay points (1 point ≈ 0.25% reduction)
  • Shop insurance - Get 3-5 quotes, save $50-150/month
  • Appeal property taxes - Many properties over-assessed
  • Interest-only option - Boosts DSCR by 20-30%

Strategy 3: Increase Down Payment​

Down PaymentLoan AmountMonthly P&IDSCR
20%$280,000$1,9571.10
25%$262,500$1,8351.18
30%$245,000$1,7131.26

Based on $350K purchase, 7.5% rate, $2,500/mo rent

Getting the Best Rate​

Rate Factors (Biggest Impact First):​

  1. Credit score - Biggest single factor
  2. DSCR ratio - Higher = better rate
  3. LTV - More down payment = better rate
  4. Property type - SFR best, condo higher
  5. Loan amount - Sweet spot: $150K-$500K

Rate Improvement Strategies:​

  • Improve credit before applying (pay down cards)
  • Choose property with high DSCR potential
  • Shop multiple lenders (MoneyMatcher does this)
  • Lock at favorable time

Choosing the Right Property​

High DSCR Property Characteristics:​

  • ✅ Strong rent-to-price ratio (0.8%+ monthly)
  • ✅ Low property taxes
  • ✅ Multi-unit (multiple income streams)
  • ✅ Emerging markets (better cash flow)

Properties to Approach Carefully:​

  • ⚠️ High-appreciation, low-rent markets
  • ⚠️ Luxury properties (limited tenant pool)
  • ⚠️ High HOA properties

Portfolio Optimization​

Use DSCR to Scale:​

  • No DTI limits
  • Each property evaluated independently
  • Scale from 1 to 100+ properties

Strategy:​

  1. Start with strongest DSCR properties
  2. Build track record
  3. Use equity to buy more
  4. Refinance as rates drop

Common Mistakes to Avoid​

  1. ❌ Overestimating rent
  2. ❌ Underestimating expenses
  3. ❌ Ignoring prepayment penalties
  4. ❌ Not shopping lenders
  5. ❌ Skipping due diligence

When NOT to Use DSCR​

Consider conventional instead if:

  • Strong W-2 income
  • This is your 1st-2nd property
  • You want absolute lowest rate
  • You qualify for Fannie/Freddie

Pro Tips from Top Investors​

"I always run numbers assuming 10% under market rent." — Sarah M., 47 units

"Interest-only is my secret weapon for cash flow." — David L., 120 units

"Shop insurance every year. Saved $2,400/year across my portfolio." — Michael T., 22 units

Quick Reference​

┌─────────────────────────────────────────────────────┐
│            DSCR OPTIMIZATION CHECKLIST              │
├─────────────────────────────────────────────────────┤
│  TO INCREASE DSCR:                                  │
│  □ Raise rent to market rate                        │
│  □ Increase down payment                            │
│  □ Buy down interest rate                           │
│  □ Shop insurance                                   │
│  □ Appeal property taxes                            │
│  □ Consider interest-only                           │
│                                                     │
│  TO GET BEST RATE:                                  │
│  □ Improve credit score to 720+                     │
│  □ Achieve DSCR of 1.25+                            │
│  □ Put down 25%+                                    │
│  □ Shop multiple lenders                            │
└─────────────────────────────────────────────────────┘

Get Your Custom Quote →