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DSCR
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DSCRdad_303

I own three rental properties through an LLC and do real estate full-time, but I pay myself through distributions and my tax returns show a loss after depreciation. Every traditional lender has turned me away. Can a DSCR loan actually help me?

Answer from Jon Howard (HCP): Yes, and this is exactly the scenario DSCR loans were built for. DSCR (Debt Service Coverage Ratio) loans qualify you based on the property's rental income, not your personal tax returns. We calculate DSCR as gross monthly rent divided by the property's PITIA (principal, interest, taxes, insurance, association dues). A DSCR of 1.0 means the rent exactly covers the payment; 1.25 means rent is 25% above the payment, which most lenders prefer.

You do not need to show W-2 income, tax returns, or employment. What we verify: (1) credit score (usually 660+ for best pricing, we fund down to 620), (2) the property's current lease or market rent appraisal (Form 1007), (3) two months of reserves, (4) title is vesting in an entity or personal name. Depreciation losses on your Schedule E do not count against you — we ignore them entirely.

Rates today run roughly 7.5–8.75% on 30-year fixed DSCR, with 20–25% down typical. If you want a quick qualification check, send me the property address, estimated value, and current rent and I will run it through our DSCR engine in about 10 minutes.

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Jon Howard
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Great question — and yes, this is exactly the space DSCR loans were built for. DSCR stands for Debt Service Coverage Ratio, which is just a fancy way of saying "does the property's rent cover the mortgage payment plus taxes and insurance?" The lender looks at the property's cashflow, not your tax returns.

For your scenario — three rentals in an LLC with distributions and a paper loss from depreciation — here is what actually matters at underwriting:

  • Property-level rent vs. PITIA (principal, interest, taxes, insurance, HOA). Target ratio is 1.00–1.25 for best pricing.
  • Credit score — 680+ opens most doors, 720+ earns real rate breaks.
  • Reserves — 6 months PITIA in the bank per loan is the standard ask.
  • LLC vesting is fine — most DSCR lenders close in the LLC name directly.

Practical next step: pull the current market rent on each property (AppFolio, Rentometer, or an actual lease), add up the PITIA, and calculate the ratio yourself. If you are above 1.00 on each property you are in the conversation.

Happy to run your specific numbers — call 970-457-9107 or email jon@homesteadcapitalpartners.com.

NMLS #2587985 · Licensed Colorado · For educational purposes — not a commitment to lend.

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Riley O'Sullivan
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For anyone reading this who's hit the same wall — I put together a quick reel on our Instagram walking through what the DSCR intake packet actually looks like. Rent comp + PITIA + reserves, in plain English. The thing I'd add to Jon's answer is that the LLC vesting question freaks people out for no reason. Most of our DSCR closes this year have been in the LLC name — the lender doesn't care about your W-2, they care about whether the rent covers the mortgage. That's literally it. Pull the lease, pull the tax/insurance, and see where you land.

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RentalRookie
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I was in almost the exact same spot two years ago — three SFR rentals in an LLC, depreciation wiping out my W-2 side gig on paper, and Chase flat-out told me "come back when you file two years of W-2 again." Felt ridiculous because the properties were cash-flowing fine.

DSCR loan is what finally got me moving. I agree with Jon's breakdown — the property-level rent vs PITIA ratio is the only number that matters. What nobody told me going in: pull your actual lease rent, not the optimistic number you wish you were getting. One of mine had a legacy tenant paying $150 under market and the appraiser's Form 1007 caught it. Ended up having to put 25% down instead of 20% on that one.

Also — reserves. I had the money, but it was parked in a brokerage that took 4 days to sell out of. Underwriting wanted seasoned funds in checking/savings, and I burned almost two weeks moving money around. If you've got 6+ months PITIA per property sitting in cash already, you're fine. If not, start that transfer now.

Ratio on all three came in between 1.10 and 1.30 — closed in 38 days.

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