Dscr advice that y’all should jump on

Inspector · Member since 2025 · 5 posts · 15 votes

Your broker just offered you a DSCR loan on a deal that doesn't cash flow and called it a win. You're about to find out whose win it actually was.

No-ratio DSCR loans don't require the property to cover the payment. 30-35% down. Higher rate. Lender is protected. Broker gets paid.

You're the one left feeding a property that was never structured to feed you back.

One vacancy. One repair. One soft rental market. Every shortfall comes straight out of your pocket every single month until you can't cover it anymore.

This product is real. Brokers are selling it as a creative solution. A deal that doesn't cash flow isn't a deal. It's a liability with a closing date.

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Reggie NworieBusiness Member

Lender · San Antonio, TX · Member since 2020 · 55 posts · 40 votes

6mo

Ok, so I'm going to take the other side of this argument. A no ratio DSCR loan can come in handy and I can give you a specific example. I had a borrower in Texas who was having a hard time selling a property after renovations were completed. Rather than taking a default due to the loan maturing, they refinanced into a no ratio DSCR loan instead and converted the property into an Airbnb. The market rent would not have been enough to cash flow, but the Airbnb income was.

To your point, you don't generally want to use this option because it could be problematic, but it exists because sometimes, it's better than the alternative and it could buy the borrower enough to time to either get new higher paying tenants in or enough time to completely change the income strategy altogether. There is no magic bullet that works in all situations, but that's why we take the time to understand the specific scenario at hand and provide solutions on a case-by-case basis.

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
6mo
Most DSCR loans that are under 1.2 can be very problematic for borrowers who don't have adequate cash reserves. That is something we are seeing happen frequently and more often as we buy non-performing notes. We are seeing an uptick in the number of non-performing DSCR loans that have plenty of equity, but due to rates, taxes, insurance, and other fees, the ratios have gone down and the people are equity rich and cash poor.
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Kenneth GarrettPro Member
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
6mo
I still rely on the 1.25 ratio. Hopefully the numbers are better than that. In my mind, if the property doesn’t have enough cash flow it’s a bad investment. It needs to pay for itself. I’m not talking a $100 a month. One water heater replacement will eat that up for almost a year’s cash flow.
This is why the BRRRR method exceeds other rental strategies. Take care of the big ticket items to reduce those cost and the nagging maintenance calls that will eat you alive.
I understand in some markets appreciation is relied on. I call it the bonus and can be fantastic. I do not rely on it.
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Reggie NworieBusiness Member
Lender · San Antonio, TX · Member since 2020 · 55 posts · 40 votes
6mo
Ok, so I'm going to take the other side of this argument. A no ratio DSCR loan can come in handy and I can give you a specific example. I had a borrower in Texas who was having a hard time selling a property after renovations were completed. Rather than taking a default due to the loan maturing, they refinanced into a no ratio DSCR loan instead and converted the property into an Airbnb. The market rent would not have been enough to cash flow, but the Airbnb income was.
To your point, you don't generally want to use this option because it could be problematic, but it exists because sometimes, it's better than the alternative and it could buy the borrower enough to time to either get new higher paying tenants in or enough time to completely change the income strategy altogether. There is no magic bullet that works in all situations, but that's why we take the time to understand the specific scenario at hand and provide solutions on a case-by-case basis.
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Frankie VozziBusiness Member
Member since 2025 · 346 posts · 87 votes
6mo
This is a solid point and honestly something more investors should be aware of.

DSCR loans can be a great tool, when the deal is structured correctly from the start. If the property doesn't have a clear path to cash flow (or at least stabilization), it puts all the risk on the investor long term.

Where I’ve seen them work best is when:
• The asset is close to market rents or has a clear value-add plan
• The investor has reserves for vacancies/repairs
• The numbers are underwritten conservatively not optimistically

Used the right way, DSCR can help scale. Used the wrong way, it can definitely turn into what you described, At the end of the day, the deal has to make sense first financing should support it, not force it.

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Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
6mo
Quote from @Taissa Victoria Jones:

Your broker just offered you a DSCR loan on a deal that doesn't cash flow and called it a win. You're about to find out whose win it actually was.

No-ratio DSCR loans don't require the property to cover the payment. 30-35% down. Higher rate. Lender is protected. Broker gets paid.

You're the one left feeding a property that was never structured to feed you back.

One vacancy. One repair. One soft rental market. Every shortfall comes straight out of your pocket every single month until you can't cover it anymore.

This product is real. Brokers are selling it as a creative solution. A deal that doesn't cash flow isn't a deal. It's a liability with a closing date.

Obvious AI Slop - what is the point of this post?
"No Ratio" DSCR Loans can certainly be valuable in certain scenarios - buying with a below-market lease, a DSCR Lender that wont use STR income to qualify, a personal situation where the tax savings more than offset - there are real ways in which this flexibility is very helpful.
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
6mo
Quote from @Taissa Victoria Jones:

Your broker just offered you a DSCR loan on a deal that doesn't cash flow and called it a win. You're about to find out whose win it actually was.

No-ratio DSCR loans don't require the property to cover the payment. 30-35% down. Higher rate. Lender is protected. Broker gets paid.

You're the one left feeding a property that was never structured to feed you back.

One vacancy. One repair. One soft rental market. Every shortfall comes straight out of your pocket every single month until you can't cover it anymore.

This product is real. Brokers are selling it as a creative solution. A deal that doesn't cash flow isn't a deal. It's a liability with a closing date.

They only really make sense when the property is not rented out as a regular LTR or STR. If say for example the property is rented out to a business, assisted living, or rent by the room and normal DSCR guides do not allow for this structure, then a no ratio makes sense if the borrower is unemployed or can't show any income.
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- Robin SimonBusiness Member
  Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
  6mo
  Quote from @Erik Estrada:
  
  Quote from @Taissa Victoria Jones:
  
  Your broker just offered you a DSCR loan on a deal that doesn't cash flow and called it a win. You're about to find out whose win it actually was.
  
  No-ratio DSCR loans don't require the property to cover the payment. 30-35% down. Higher rate. Lender is protected. Broker gets paid.
  
  You're the one left feeding a property that was never structured to feed you back.
  
  One vacancy. One repair. One soft rental market. Every shortfall comes straight out of your pocket every single month until you can't cover it anymore.
  
  This product is real. Brokers are selling it as a creative solution. A deal that doesn't cash flow isn't a deal. It's a liability with a closing date.
  
  They only really make sense when the property is not rented out as a regular LTR or STR. If say for example the property is rented out to a business, assisted living, or rent by the room and normal DSCR guides do not allow for this structure, then a no ratio makes sense if the borrower is unemployed or can't show any income.
  
  thats just fraud lol then right? thats not the intention of no ratio DSCR Loans and there are legit reasons for them
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- Erik EstradaBusiness Member
  Lender · Member since 2022 · 6k+ posts · 1k+ votes
  6mo
  Quote from @Robin Simon:
  
  Quote from @Erik Estrada:
  
  Quote from @Taissa Victoria Jones:
  
  Your broker just offered you a DSCR loan on a deal that doesn't cash flow and called it a win. You're about to find out whose win it actually was.
  
  No-ratio DSCR loans don't require the property to cover the payment. 30-35% down. Higher rate. Lender is protected. Broker gets paid.
  
  You're the one left feeding a property that was never structured to feed you back.
  
  One vacancy. One repair. One soft rental market. Every shortfall comes straight out of your pocket every single month until you can't cover it anymore.
  
  This product is real. Brokers are selling it as a creative solution. A deal that doesn't cash flow isn't a deal. It's a liability with a closing date.
  
  They only really make sense when the property is not rented out as a regular LTR or STR. If say for example the property is rented out to a business, assisted living, or rent by the room and normal DSCR guides do not allow for this structure, then a no ratio makes sense if the borrower is unemployed or can't show any income.
  
  thats just fraud lol then right? thats not the intention of no ratio DSCR Loans and there are legit reasons for them
  
  No that is not fraud. There are many lenders that allow assisted living facilities, rent by the room, and other rental arrangements, and do not consider DSCR when qualifying. For example Velocity Mortgage allows this.
  If you are doing a residential style DSCR loan, then yes, you will be committing fraud if you get a DSCR loan and then rent it out to a business or breach the loan agreement you sign at closing.
  [email protected]818-269-7983
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
6mo
I will add,
No ratio's work very well in a situation where your lease agreement is significantly higher than market rent. Most traditional DSCR lenders will cap the qualifying rental income either to 120% of market rent or the lower of the two. If the borrower has 12 months reserves (typically) and the property is actually occupied and rented out, then a no ratio makes sense in this situation as well.
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Nadean Willis
Lender · Jacksonville, FL · Member since 2026 · 46 posts · 17 votes
6mo
@Taissa Victoria Jones

I'm so sorry if you had a bad experience with your loan.

As the others said, there are many reasons someone may invest with a DSCR loan where the market rent doesn't cover the expenses. Usually, the rent is considerably higher than market rent but what hasn't been mentioned is sometimes high earning investors look for these opportunities to have the tax write off.
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Stacy RaskinBusiness Member
Lender · Member since 2022 · 1k+ posts · 508 votes
6mo
DSCR no ratio loans can be helpful if the investor did rehab, it's recently been leased and/or is looking to rent the property and the investor wants to get some of the investor's money out of the property for new deals. If it's a newer rental the investor may not have the one year rental history & DSCR 1 ratio that some DSCR loan programs require to do a cash out refinance.
Also some people buy in what is more of an appreciation market versus a cash flow market and it is worth it to them to ride the appreciation wave and sell in the future. I've seen that in areas like the Los Angeles, CA market where there may not be cash flow or very little but the investor has decided it's worth it for the appreciation compared to the monthly loss between the rent and the expenses.
It really depends on the specific loan and borrower situation as to whether it makes sense.
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Patrick Roberts
Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
6mo
This post is the equivalent of saying that hammer manufacturers are out to get you because you smashed your hand using their hammer when you really shouldve been using a wrench. These products are a tool, just like any other. The effectiveness of a tool, as well as its collateral damage, is determined by the the use case and the user.
While I will readily and happily concede that many originators are purely salespersons with no actual skin in the game relative to a borrower's best interest, this has nothing to do with the fact that are plenty of legit use cases for no-ratio DSCR loans.
Side note - any lender that is making an unsound loan because they're "protected" by the collateral will likely be in for a shock over the next year or two.
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Nick BelskyBusiness Member
Residential and Commercial Broker · Member since 2021 · 1k+ posts · 704 votes
6mo
We rarely see situations where No Ratio makes sense, but sometimes they do...
I have clients who look at bridge options and we will present no ratio to keep their rates and carrying costs lower vs doing a traditional bridge with no rehab component. Especially, if they have a solid short term exit plan, lower LTVs, and are fine with the 0/1 PPP option.
As others have pointed out, if the lease is much higher than FMR, but lenders normally go by the lower of the two... so the reality may not match the underwriting.
I've had clients opt for No Ratio mostly for these two reasons above. I definitely don't go market them or seek clients who specifically target them... but it is a good tool to have in your tool belt should the need come up for it.
Cheers!
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
6mo
Quote from @Taissa Victoria Jones:

Your broker just offered you a DSCR loan on a deal that doesn't cash flow and called it a win. You're about to find out whose win it actually was.

No-ratio DSCR loans don't require the property to cover the payment. 30-35% down. Higher rate. Lender is protected. Broker gets paid.

You're the one left feeding a property that was never structured to feed you back.

One vacancy. One repair. One soft rental market. Every shortfall comes straight out of your pocket every single month until you can't cover it anymore.

This product is real. Brokers are selling it as a creative solution. A deal that doesn't cash flow isn't a deal. It's a liability with a closing date.

So, who do you want to protect idiots from themselves?
What's wrong with, "survival of the fittest"?
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Alex BekezaBusiness Member
Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
3mo
No-ratio DSCR is a real product with a real use case, but you're right that it gets sold wrong constantly. It exists for scenarios like a strong borrower who wants to close on a property they're confident will stabilize, a value-add deal where in-place rents don't reflect the actual market rent yet, or someone using it strategically as a bridge before a rate buy down or a planned rent increase. Used correctly, it's a tool. Used to paper over a deal that just doesn't work, it's exactly what you described: a liability with a closing date.

The problem isn't the product, it's brokers pushing it on deals where there's no real path to the numbers working, just to get a deal closed. That's not creative financing, that's just moving risk onto the client without them fully understanding what they signed up for.

The fix is on the investor side too though: never take a broker's word for whether a deal cash flows or what your true payment and DSCR ratio actually is. Run the numbers yourself before you're sitting at the closing table. I built a pricing tool that shows live DSCR pricing and actual ratios across different structures so you can see exactly what you're getting into and whether the deal genuinely pencils, instead of relying on someone else's spin. Link's in my signature if you want to check your own deals against it.
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