Case Study: How to Structure a DSCR Refinance Without Tax Returns (Real Numbers & Les

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Case Study: How to Structure a DSCR Refinance Without Tax Returns (Real Numbers & Les

James Gregotski
Lender 路 New York, NY 路 Member since 2026 路 1 post 路 1 vote

Hey BP Community! 馃憢

I see a lot of investors in the forums asking how to pull cash out of a stabilized rental without running into the strict debt-to-income (DTI) walls of conventional underwriting.

I wanted to break down a recent DSCR (Debt Service Coverage Ratio) refinance scenario we worked through to show the actual mechanics, numbers, and key takeaways for landlords looking to scale.

馃搳 The Deal Breakdown

  • Property Type: Single-Family Residence (SFR)
  • Appraised Value: $350,000
  • Current Gross Monthly Rent: $2,800/month
  • Loan Strategy: DSCR Cash-Out Refinance

馃敘 How the DSCR Calculation Worked

DSCR looks strictly at the property's cash flow rather than personal income, tax returns, or W-2s. The core formula is:

$$\text{DSCR} = \frac{\text{Gross Monthly Rent}}{\text{Total Monthly Debt Service (PITIA)}}$$

Here is how the numbers played out:

  • 75% LTV Loan Amount: $262,500
  • Estimated PITIA (Principal, Interest, Taxes, Insurance, HOA): ~$2,150/month
  • Calculation: $\$2,800 \div \$2,150 = \mathbf{1.30\text{ DSCR}}$

Since the DSCR came in well above 1.0, the property fully qualified on its own cash flow, allowing the investor to pull out equity to fund their next purchase.

馃挕 Key Takeaways for Investors

  1. No Personal Income Verification: The underwriting focus was entirely on the lease agreement, market rent appraisal (Form 1007), and credit score.
  2. Entity Funding: The loan was closed under the investor's LLC, keeping their personal credit clear for future leverage.
  3. Appraisal Matters: Always make sure your projected rent matches realistic market comps鈥攊f the rent comes in too low on the appraisal, it can push your DSCR below target thresholds.

I鈥檇 love to hear from other landlords on BP: What DSCR ratios or leverage caps are you seeing work best in your local market right now?

Feel free to drop any questions below about how DSCR underwriting works behind the scenes!

Best,

James Gregotski

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  • James Driscoll
    Banker 路 MA 路 Member since 2026 路 120 posts 路 31 votes
    1mo

    Good breakdown of the mechanics. The 1.30 DSCR on that SFR is a solid number, and 75% LTV on a cash-out is pretty standard for DSCR products right now. A few things worth adding from what I see in practice.

    On DSCR thresholds: most lenders want 1.0 or better, but the pricing tiers are where it gets interesting. You'll typically see better rate adjustments once you clear 1.20 or 1.25, so if a borrower is sitting at 1.05 it's worth asking whether a slightly lower LTV improves the ratio enough to hit the next pricing tier. Sometimes pulling out a little less cash saves money over the life of the loan.

    On the LLC point, that's accurate and worth underscoring for anyone new to this. DSCR loans are one of the few products that close in an entity without requiring a personal income story. The trade-off is rate: non-QM entity loans generally carry a premium over conventional. Some investors decide that's worth it for liability protection and credit separation, others keep the property in their personal name to access better pricing. Both are defensible depending on the portfolio strategy.

    One thing the post touches on briefly but deserves more attention: the Form 1007. That market rent opinion from the appraiser is doing a lot of work in this structure. If an investor is purchasing or refinancing in a market where rents are moving fast, the appraisal can lag actual conditions. It's worth having a solid comp package ready to give the appraiser, because a rent estimate that comes in $200 low can shift a 1.25 DSCR to something that triggers a pricing hit or disqualifies the deal altogether.

    As for ratios I see working well: 1.20+ is a comfortable target, 1.0 to 1.15 is doable but expect tighter pricing, and some lenders will go below 1.0 (sometimes called "DSCR below 1") on a case-by-case basis, usually with a lower LTV ceiling. On leverage, 75-80% LTV for SFR is typical on cash-out; some lenders cap cash-out at 75% regardless of DSCR.

    I do DSCR loans regularly, including equity lines on rentals up to 4 units that let investors pull cash out without doing a full refinance, which can make sense when the first mortgage has a rate worth keeping.

    James Driscoll

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