What is it? (plain English)
A DSCR (debt-service-coverage-ratio) rental loan is a business-purpose loan qualified primarily on whether the property's rental income covers its debt payment — rather than on your personal income. DSCR = rental income ÷ the property's payment.
Who is it for?
Buy-and-hold and portfolio investors, self-employed investors, and those scaling beyond what personal debt ratios allow — often closing in an LLC.
When might it make sense?
When you're acquiring or refinancing a rental and want to qualify on the property's cash flow, or when your personal income documentation makes conventional investor financing difficult.
Good to know
Lenders look at the DSCR, the loan-to-value, your credit, reserves, and the property type. A stronger DSCR and lower LTV generally mean better terms; cash-out is usually capped lower than purchase. It often serves as the long-term takeout for a completed flip or build.
Potential advantages
Qualifies on the property, not your tax returns; entity-friendly; built for scaling a portfolio; interest-only options on some programs.
Potential limitations
Higher rate than owner-occupied financing; reserves required; rate-sensitive cash flow; weaker DSCR means tighter terms; possible prepayment penalty.
Documents you may need
Lease or market-rent support, property financials, entity documents, reserves, credit, appraisal.
Questions to ask before you choose
- What's my DSCR at today's payment?
- What's my FICO band and LTV?
- Do I have the required reserves?
- Am I holding in an entity?
- What's my hold strategy?
How Kyon helps
We help you run the DSCR at realistic numbers, structure the loan for your hold strategy, and arrange (or, where it fits, fund) the financing.