Investing in small multifamily properties like duplexes, triplexes, and fourplexes is a proven strategy for building wealth through rental income and long-term appreciation. These properties strike the perfect balance between scalability and manageability, making them especially attractive to both beginner and experienced investors.
However, financing multi-unit investment properties can present unique challenges—particularly for self-employed investors or those purchasing through LLCs. That’s where DSCR loans (Debt Service Coverage Ratio loans) come in. These income-based loans offer a flexible solution for financing 2–4 unit properties without requiring personal income verification.
In this guide, we’ll explore how DSCR loans work for multi-unit properties, their benefits, qualification requirements, and how to use them to scale your real estate portfolio.
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A DSCR loan is a type of non-QM (non-qualified mortgage) financing designed for real estate investors. Unlike traditional mortgages, which rely on the borrower’s personal income and debt-to-income (DTI) ratios, DSCR loans are underwritten based on the income generated by the property itself.
DSCR = Net Operating Income (NOI) / Annual Debt Service
For example, if a fourplex earns $60,000 in NOI annually and your mortgage payments total $48,000 per year:
DSCR = $60,000 ÷ $48,000 = 1.25
Most DSCR lenders require a minimum DSCR of 1.20 to 1.25 for approval.
Multi-unit properties like duplexes and fourplexes offer several advantages:
And with a DSCR loan, you can finance these assets based on their income—not your personal tax returns.
For many real estate investors, especially those using aggressive tax strategies or investing through LLCs, qualifying for traditional loans can be difficult. DSCR loans are tailor-made for this situation.
Whether you’re house hacking your first duplex or scaling up with a portfolio of fourplexes, DSCR financing offers the flexibility and speed you need.
| Loan Feature | Typical Range |
|---|---|
| Minimum DSCR | 1.20 – 1.25 |
| Maximum LTV | Up to 80% |
| Credit Score Requirement | 660+ (700+ preferred for best rates) |
| Loan Amount Range | $100,000 – $5,000,000+ |
| Term Options | 30-year fixed, 5/6 ARM, or interest-only |
| Ownership Type | Individual, LLC, LP, Corporation |
| Prepayment Penalty | Yes (3–5 year step-down or flat) |
| Reserve Requirements | 6–12 months of PITIA |
Note: Some lenders may require a rent roll or income documentation per unit, especially for fourplexes or properties with mixed rental history.
DSCR loans can be used to finance the following multi-unit properties:
These properties must be non-owner occupied to qualify as investments under DSCR loan programs.
The approval process centers around the property’s rental income and your credit/reserve strength.
Some lenders may also request a rent roll and trailing 12-month income/expense statement, especially for properties with existing tenants.
Finance a stabilized 4-unit rental property in a growing market with no income docs required.
Convert short-term financing into a long-term DSCR loan for improved cash flow and equity access.
Leverage equity in an existing triplex or fourplex to fund a down payment on your next deal.
Buy, rehab, rent, and refinance a distressed duplex using DSCR loan proceeds after stabilization.
Investor Profile: Mark owns an LLC and wants to purchase a fully rented triplex generating $54,000 in annual rent. After expenses, his projected NOI is $42,000. His proposed loan has annual debt service of $33,000.
DSCR = $42,000 ÷ $33,000 = 1.27
Mark qualifies for a DSCR loan, closes in 3 weeks, and adds a solid cash-flowing asset to his portfolio without ever showing his personal tax returns.
| Challenge | Solution |
|---|---|
| High vacancy or new units | Provide market rent projections or delay loan until stabilization |
| Low DSCR due to property taxes/HOA | Negotiate tax assessments or factor in higher NOI from rent increases |
| STR income not recognized by lender | Choose lenders that accept Airbnb/Vrbo income with documentation |
| Fourplex in mixed-zoning or STR-restricted area | Confirm zoning compliance and rental legality before applying |
Multi-unit properties are one of the most efficient ways to generate consistent rental income and scale your real estate portfolio. And with DSCR loans, you can finance duplexes, triplexes, and fourplexes using the property’s cash flow—not your personal finances.
Whether you’re looking to invest through an LLC, refinance a cash-flowing fourplex, or transition from short-term to long-term debt, DSCR loans provide the speed, flexibility, and scalability needed to grow with confidence.
Sponsored Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
