Why this scenario matters
DSCR lending decisions often hinge on small assumption changes. A pre-screen model reduces wasted applications and helps you negotiate from a stronger position.
Baseline modeling framework
- Start with conservative effective rent, not optimistic pro-forma rent.
- Include vacancy, management, maintenance, tax, insurance, and HOA when applicable.
- Run at least three rate scenarios and two vacancy scenarios.
- Verify lender overlays before committing capital.
Practical checklist
- Export your assumptions before every lender call.
- Keep a stress-case DSCR threshold of at least 1.15 for downside resilience.
- Compare payment structure, not just headline rate.
Related guides
FAQ
Q: Which scenario has better pricing? A: Purchase loans often price 0.125–0.25% lower than cash-out due to lower LTV risk. Cash-out trades equity for liquidity at a rate premium.
Q: Can I cash out immediately after purchase? A: Most lenders require 6–12 months seasoning. Delayed financing exceptions exist but require documentation of investment intent at purchase.
Q: How does each affect DSCR requirements? A: Purchase DSCR is based on acquisition NOI. Cash-out uses current NOI, which may be higher if you’ve improved the property.
Next Step
Use the DSCR Calculator to model both scenarios and compare your coverage ratio and total cost of capital.