Same Cap Rate, Completely Different Risk — What DSCR Actually Tells You
Two properties can have identical cap rates and still carry very different risk once you look at DSCR. Cap rate only measures the property's income against its price — it says nothing about how that income compares to what you actually owe the lender each month.
A property bought with 25% down at a low rate can have a comfortable DSCR at the same cap rate as one bought with 10% down at a higher rate, where DSCR sits uncomfortably close to 1.0. Same "deal quality" on paper, very different margin for error if rent dips or a vacancy hits.
I run DSCR alongside cap rate before calling any refi number "safe." Anyone been burned by a deal that looked fine on cap rate alone?