What is a DSCR loan?

Quick answer

A DSCR (debt-service-coverage ratio) loan is a rental-property loan underwritten on the property's income rather than your personal income. If the rent comfortably covers the loan payment, you can qualify — even with a thin W-2.

That's why DSCR loans are the standard long-term financing for investors, and the usual refinance exit in the BRRRR strategy.

Conventional loans cap out fast for active investors because they qualify on your personal income. DSCR loans solve that.

They look at the property, not your paycheck, which is what lets a serious investor keep buying.

Key takeaways

  • → DSCR loans qualify on the property's cash flow, not your personal income.
  • → DSCR = net operating income ÷ debt payment; lenders want roughly 1.0–1.25+.
  • → They scale with a portfolio where income-based loans stop.
  • → They're the typical refinance exit for the BRRRR method.

How DSCR works

The debt-service-coverage ratio divides the property's net operating income by its total debt payment. A 1.25 DSCR means the property earns 25% more than the loan costs.

Most lenders want a DSCR of at least 1.0 to 1.25. The higher the ratio, the better your terms, because the rent more comfortably covers the payment.

Why investors use them

Because qualification rides on the property's numbers, DSCR loans scale with your portfolio. An investor with several properties can keep borrowing where conventional, income-based loans would have stopped.

They're a core tool for buy-and-hold investors building rental income.

DSCR and the BRRRR method

In the BRRRR strategy, you buy and rehab with short-term hard money or a bridge loan, rent the property, then refinance into a DSCR loan that repays the short-term financing and returns your capital.

That refinance is what makes the whole strategy repeatable.

What makes a DSCR loan work

It hinges on realistic rents. If the rent covers the payment with margin, the property cash-flows and the loan makes sense. Underwrite the rent conservatively, and compare costs on our rates page.

For the short-term buy-and-rehab step before the DSCR refinance, eBoost Partners offers bridge construction financing.

Related guides

Rental & BRRRR loans

DSCR is the BRRRR exit.

Fix & flip loans

Short-term buy-and-rehab financing.

Hard money loans

Fund the buy-and-rehab step.

Bridge loans

Carry the deal to refinance.

Construction loan rates

Compare financing costs.

Commercial construction loans

Build-side financing.

Frequently Asked Questions

What is a DSCR loan?
A DSCR (debt-service-coverage ratio) loan is a rental-property loan underwritten on the property's income — whether the rent covers the debt payment — rather than your personal income. It's the standard long-term financing for real estate investors.

How is DSCR calculated?
DSCR = the property's net operating income divided by its total debt payment. A DSCR of 1.25 means the property earns 25% more than the loan costs. Most lenders want at least 1.0–1.25.

Why do investors use DSCR loans?
Because they qualify on the property's cash flow, not the borrower's W-2 income, they scale with a portfolio. An investor with many properties can keep borrowing where conventional income-based loans would stop.

Are DSCR loans good for BRRRR?
Yes — a DSCR loan is the typical refinance exit in the BRRRR method. You buy and rehab with short-term financing, rent the property, then refinance into a DSCR loan to pull your capital back out.